EU facing a new crisis, Larry Elliott writes

The Guardian published an article by Larry Eliott entitled "The eurozone crisis - history is repeating itself … again." According to the author, the Eurozone is facing a new serious crisis. 

"It’s funny how history repeats itself. The inconclusive general election in 2010 took place when the economy appeared to be on the mend and against the backdrop of a crisis in the eurozone prompted by Greece. As things stand, we could be in for a repeat performance in May 2015," the author writes.

"Be in no doubt, what’s happening in Europe matters to Britain. The eurozone is perhaps one crisis and one deep recession away from splintering. The more TV pictures of rioting on the streets of Athens or general strikes in Italy between now and the election, the better support for Nigel Farage’s UK Independence party will hold up," the author believes.

Stronger support for Ukip will encourage the Conservatives to adopt a more Eurosceptic approach, hardening their stance on the concessions required for them to continue supporting Britain’s membership of the EU. Meanwhile, a permanently weak eurozone economy will push Britain’s trade balance into the red. The economic debate in the current parliament has been about sorting out the budget deficit; the debate in the next parliament will also be about sorting out the current account deficit," the article reads.

"Greece’s recent economic performance has been pretty good. The economy is growing, unemployment is on the decline and the debt to GDP ratio has come down a bit. Time, you might think, to cut Athens a bit of slack. Not if you are the German government, the European commission or the European Central Bank. No, they are insisting on even more austerity and continued surveillance by the International Monetary Fund," Eliott admits..

"But the Greeks have had a bellyful of austerity. They have had enough of being pushed around. Predictably, support for the anti-austerity Syriza party is strong and the mood is angry. In an attempt to regain the initiative, the government in Athens brought forward the dates for the votes in parliament to elect a new president. If by the time of the third vote at the end of the December, the centre right’s candidate Stavros Dimas, a former EU commissioner, has not secured 180 votes out of 300 – unlikely as things stand – there will be an election that Syriza could win," he stresses.

"A crisis in Greece will take months to unfold. Bond yields will rise in every eurozone country seen as vulnerable: Portugal, Spain, Italy and, perhaps, Belgium. Business and consumer confidence will be hit. Concerns about the non-performing loans held by Europe’s shaky banks will be reignited," the article reads.

"This might not matter so much if this were the Europe of the 1950s and 1960s, which enjoyed rapid rates of growth and full employment. The Europe of 2014 is not like that: it has barely any growth, double-digit unemployment, is on the cusp of deflation, and – above all – is saddled with a currency that doesn’t work," the author writes.