The outcome of the June 17 Greek legislative elections will not only determine whether Greece exits the eurozone, but it could also seal the fate of the entire postwar European project. According to the latest polls, the center-right New Democracy (ND) party and the Coalition of the Radical Left, known as Syriza, are in a dead heat. Taking first place is crucial, because it comes with a 50-seat bonus in parliament, which means that no government can be formed without the winner.

For its part, ND's chances hang on whether it can rally the voters who deserted the party in the last national elections on May 6. Those elections were an attempt, at least, at a power grab by ND's leader, Antonis Samaras. He had built his political profile by standing in opposition to the May 2010 bailout agreement and adjustment program championed by the European Union, the European Central Bank, and the International Monetary Fund -- popularly known as the troika. Then, Samaras' moment came in November, after former Prime Minister George Papandreou called for a referendum on Greece's euro membership. Brussels quickly threatened to withdraw support from Greece, and Papandreou, realizing that he had slipped up, threw support behind a coalition government led by the former ECB Vice President Lucas Papademos. That government successfully negotiated a debt write-down and finalized the latest adjustment with the troika. Samaras backed that government, too, on the condition that both its duration and mandate be limited. But that turnaround undermined his credibility among voters.

Samaras is widely seen as representing the corrupt and ineffective Athens political establishment that led the country to ruin. After all, Greece's public debt and deficit significantly worsened during ND's last tenure in government, from 2004-9. It should come as no surprise, then, that when he forced the May 6 elections, hoping to win big, he brought home the worst ND result ever: Not even one in five voters backed the party.

But the premature elections did something else: They paralyzed the real progress that was afoot. In the months before the elections, austerity measures dictated by the troika had boosted exports. Athens' deficit was on a sharp downward trend, on schedule to be eliminated by 2013. Despite its limited mandate, the Papademos government introduced concrete measures to fight corruption, the misappropriation of public funds, tax evasion, and inefficiency -- policies that had begun to bear fruit. A census of public pensions uncovered a stunning 200,000 bogus disability and old-age claimants, whose annual cost to the budget is conservatively estimated as upwards of $870 million. A drive to improve the efficiency of health-care spending resulted in effective cost-control measures. The Greek bank recapitalization was on course to stabilize the banking sector and inject liquidity into the market. The flight of bank deposits reversed, and the tail end of the debt "haircut" would have increased stability. The nearly $8.7 billion payment by the state of its trade and tax-refund arrears would have gone ahead, providing a huge and badly needed stimulus to the economy.

Because of Samaras' miscalculation, those positive signals have vanished. The adjustment plan is widely perceived as a failure; its critics feel vindicated. With political paralysis at the top, the Greek state's notoriously ineffective bureaucratic machinery has come to a standstill. The ND has played up Greeks' fears of exiting from the euro to try to win back votes. And given that more than 60 percent of the country has consistently supported Greece's euro membership, the ND could pick up support there.

But the ND is trending in the wrong direction. Despite the party's genuine desire to keep Greece in the eurozone, its campaign talk may be too little, too late. And without the ND, the outlook for Greece, and for Europe, grows dark, quickly.

For one, like the ND, the Pasok (the old-guard center-left party that has ruled Greece for the better part of the last three decades) is losing vote share. Many of its former supporters are defecting to Syriza, a hodgepodge coalition of former eurocommunists and far-left groups whose best electoral score until May 6 was 5.4 percent. Recent polls indicate that Syriza is now attracting discontented voters from the entire political spectrum, from extreme right to extreme left. Given its momentum, Syriza stands a good chance of winning.

So how could a group of inexperienced, wide-eyed radicals and neo-communist academics, led by the 37-year-old former student activist Alexis Tsipras, propel itself to the top of the Greek political power structure? Much of the shift comes as a response to the deep recession that has pushed unemployment above 20 percent, a loss of faith in successive austerity plans that kept missing their targets, a rejection of the corrupt ways and unpersuasive rhetoric of the two big parties, and a feeling of national humiliation brought on by the recurring spectacle of Germany constantly strong-arming Greece. Greece's voters also feel dejected following the collapse of the once-prevailing clientelist social contract, whereby votes were exchanged for jobs, favors, and an enviable standard of life, albeit one based on massive debt.

Syriza consolidated its position in the May 6 election, winning 17 percent of the vote and emerging as the anti-troika champion. Tsipras, a young and charismatic politician, has blended populist and nationalist rhetoric, peddling a combination of proud defiance and hope. He reassures voters that things cannot possibly get worse and proclaims that the cost of a Greek exit is too high to be actually realized.

The race, by the numbers, is still too close to call, but one of two outcomes is likely. In the first, ND could manage to eke out a win and form a coalition government with Pasok and a few smaller parties. The new government could be composed of technocrats, a sort of "Papademos plus" government, but one starting with substantially lower expectations and a real mandate to implement much-needed structural reforms. Yet, even such a government would not mean a rapid end to Greece's troubles. Despite the troika's signals that it plans to ease the adjustment program in exchange for a real commitment to structural reforms, it will still push for painful measures. Even on the best of days, the task of implementing such reforms would be herculean, as it would require a full-fledged reboot of the economy and a rebuilding of the state, all under conditions of severe economic strain and street opposition.

In a second scenario, Syriza could pull ahead and form a coalition government with the small center-left Democratic Left party and perhaps Pasok. It would likely follow up on its pledge to nullify the troika's deal with Greece and renege on the program's required reforms. Such a move would not necessarily lead to the country immediately defaulting on its debt, since that is directly serviced through troika funds. Yet in all likelihood, the troika, unwilling to keep funding Greece unconditionally, would reduce, or even halt, its cash infusions. Given the existing primary deficit, the new government would be forced to issue IOUs in lieu of salary and pension payments. Social unrest would ensue, with or without a bank run. The government would collapse, and eventually Greece would be forced to print (and immediately devalue) its own currency, in a way reminiscent of the Argentine crisis in January 2002. But unlike Argentina, Greece lacks primary commodities for export and is an importer of energy and food. A Greek exit would combine high inflation, high interest rates, political instability, social unrest, and incentives for politicians to perpetuate corrupt practices and further postpone structural reforms -- clearly, an explosive cocktail burying any hope for recovery.

A variant of the second scenario would be a collapse of the Greek economy just after a Syriza victory but before a new government is formed. In fact, the Greek economy is rapidly approaching its breaking point. The successive elections and accompanying paralysis have taken an enormous toll on a moribund economy. Business and consumer confidence is at an all-time low; tax revenue has crumbled; bank withdrawals spiked after the elections and reached an estimated $90 billion since the crisis began; credit for business has dried up; state agencies and pension funds have ceased payments, causing vast economic and social disruption; and import and export flows have ground down, as insurers have withdrawn credit-export insurance from Greek companies. All of this is taking place while public order collapses and crime and violence rise. In this scenario, a Syriza victory could be the straw that breaks the camel's back.

Given the enormous cost of a Greek economic collapse and the potential danger of contagion it poses, the European Union may opt to prevent a full Greek exit and mitigate its impact. This would entail, at least in theory, the use of a temporary parallel currency (the so-called Geuro), the servicing of the Greek debt by the troika, and the shoring up of Greek banks by the ECB. Moderate political parties could get a chance to clean up their act, and the Greek electorate, having glimpsed the real costs of an exit, could reassess its choice. Of course, this scenario would also require a stabilization of the eurozone through deep political, financial, and fiscal reforms currently under consideration by European leaders. And on that count, one has only to look north, to Berlin.

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  • STATHIS N. KALYVAS is Professor of Political Science and Director of the Program on Order, Conflict, and Violence at Yale University.
  • More By Stathis N. Kalyvas