Elections: Judgment Day in Athens

I am not sure exactly what I was expecting from a Marxist-Leninist political revolutionary in Athens but George Stathakis did not disappoint. I found him on the seventh floor of a boiling hot, unmarked government building, drawing heavily on a cigarette and watching the preparations for the next rally in Syntagma Square.

"I am a radical economist and a hippie," he told me, in an appropriately deep, gravelly voice. By the end of today (Sunday), he could also be Greece's new finance minister, and hold the future of the euro project in his hands.

Stathakis, an economics professor and MP of Crete, is one of the brains behind Syriza, Greece's leftist party whose dramatic ascendancy has horrified Brussels, Berlin and beyond.

If the party wins the Greek election today - it's neck-and-neck in the polls with the mainstream New Democracy party - it will form the eurozone's only radically left-wing government. Syriza's first intention is to overthrow the tyranny of Brussels and Europe's tsarina, Angela Merkel, not by the sword but by something even more painful - by ripping up Greece's €130bn (£105bn) bail-out agreement.

"There are parts of the [bail-out] memorandum we don't like," shrugged Stathakis, surprisingly relaxed about the idea of discarding an agreement that provides Greece's financial life-support. Germany has warned that if Greece breaks the agreements, it will forfeit the bail-out funds and be forced out of the euro.

"Germany will have to invent a way to throw us out of the eurozone - there is no mechanism right now," Stathakis continued. "So let them invent a process and we will discuss it."

And what happens if Brussels just cuts off the money? Greek banks are dependent on funding from the European Central Bank (ECB) and its emergency European Liquidity Assistance (ELA), and the government itself is expected to run out of cash next month.

"The ECB has an obligation to fund all European countries through the ELA, they can't just stop this, they have to support Greece," said Stathakis.

I try to imagine the German Chancellor's reaction if she were confronted with this logic - it is little wonder that today's election has been billed as a referendum on Greece's membership of the eurozone.

The timing could not be worse. Spain's borrowing costs have surged to record highs, threatening a full-blown sovereign crisis on a far bigger and more dangerous scale. Brussels' sticking plaster - the offer of euros 100bn of loans to Spanish banks - was ripped off within a matter of hours. While leaders fiddle over a response, Rome is also starting to burn. Italian borrowing costs have risen in tandem, fuelling the fires of contagion.

To the rest of the world, the first step is painfully obvious: to save Italy and Spain, its third- and fourth-biggest economies, the eurozone must unequivocally back the integrity of the union. President Barack Obama has led demands for Germany and France to bring a real and solid rescue plan at the G20 Summit in Mexico this week.

But before that, Europe's politicians face their big test -Greece. It is not just Syriza that wants to change the bail-out agreements, the mainstream New Democracy and Pasok parties have promised part-renegotiation too, so the gauntlet will be thrown down to Berlin and Paris regardless.

Merkel and her new French counterpart, Francois Hollande, are understood to have delayed leaving for Mexico until Monday morning in case the rerun of Greece's elections are again inconclusive.

But the pair hardly seemed united - on Friday, Merkel took a swipe at Hollande saying his policies could make the crisis worse. Global central banks, including the Bank of England and the US Federal Reserve, are reportedly standing ready to pump liquidity into the markets tomorrow morning just in case.

But for Merkel, the obvious step is also the hardest - supporting Greece continues to be an impossible sell at home. Under its bail-out conditions, this month Greece has to find euros 13.7bn to reduce its deficit and pay its bills but politicians say there is no money. Athens stopped paying bills last month and has warned that pensions will be paid only until July. Yet according to estimates, Greek individuals and businesses owe around €56bn in unpaid taxes.

The situation is incomprehensible for hard-working, careful-saving Germans for whom abiding by the law is intrinsic. With recession looming, the idea of diverting more cash to a nation that will not change is impossible.

German emotions are running high. Last week, Greek television reported that a German couple had walked out of an Athens restaurant without paying the bill saying they had already paid enough to Greece.

Greeks are very aware of the stereotype. One senior European official in Athens said: "I honestly think [the film] Zorba the Greek has dealt one of the most damaging blows of Greece's modern history. When Germans hear complaints about the bail-out conditions, they imagine frolicking Greeks."

As I wandered around the city's streets, I sought out Greek business leaders - who certainly are not frolicking at the moment. I found there were strong supports of structural and economic reforms, but they were also united in rebellion against the bail-out agreements.

I spoke to shipping tycoons, leading economists, entrepreneurs and trade groups, who said they are ready to work to accept pain to stay in the euro but the international rescue plans have failed and need to be reworked.

They argued that renegotiation was the only possible action, not just for Greece but the rest of Europe too. The current approach has crushed the private sector and has led both to economic collapse and a rise in extremist politics. They warn that without a fundamental volte-face in Brussels, the same fate will be imposed on other sinner states with drastic consequences.

Nicos Vernicos, a fourth-generation shipping tycoon knows about Greek political struggles, as a student he was jailed for leading pro-democracy demonstrations against the junta. He is now also president of the Greek branch of the International Chamber of Commerce.

He told me: "The majority of the Greek people were ready to accept the therapy - until they realised the therapy is wrong; now they don't want any of it. That's the reason for the rise of Syriza and the extreme right. One thing is for sure. The therapy has failed. The only solution is to negotiate the terms of the memorandum with the Europeans. This therapy is bad for Greece and it's bad for Europe."

He was backed by Dr Antonis Kefalas, economic adviser to SEV (Hellenic Federation of Enterprises) who called for a fresh start: "Any new government has to renegotiate the memorandum to extend fiscal targets by two years …Then Greece must produce a valid and believable plan for structural reforms that then have to be implemented. Then Greece and Europe must sit down and work out a new programme for the reduction of debt."

Whatever else the Greeks vote for today, one thing is for sure, they will not give any political party the mandate to quit the euro. Perhaps paradoxically, especially for Brits, the greater the pain inflicted on Greece by Brussels, the more pro-European the population seems to become. After decades of war, civil war and military rule, Greeks now associate stability with Europe - of their 38 years of democracy, Greece has been part of the European Union for 31.

Businesses particularly value the euro and European values which were injected, albeit alongside the continued state bureaucracy and corruption.

Greek shipping, the country's most famous industry, was largely conducted out of London but the euro had led most to return to Athens, bringing with them valuable foreign currency and jobs.

Despite the pain, most Greeks and almost all business leaders strongly agree that the structural reforms imposed by the troika - officials from the EU, ECB and International Monetary Fund (IMF) -were both necessary and welcome. The work of the EU task force, set up to help Greece execute the agreed reforms in each government department, is particularly popular. For businesses, quitting the euro and returning the drachma is synonymous with moving backwards into corruption and disorder.

Nikolaos Giannetos, the third generation owner of Giannetos, a fashion retailer in Athens, said through a translator: "I don't want the drachma. Back then Greece had problems and change should have happened before. It was all about children getting positions in government. The political system was all about how we should slice up a cake that we never baked ourselves."

Economists have argued that a return to drachma would allow Greece to devalue and regain its competitiveness. But the idea is dismissed by

Kefalas: "A return to the drachma would lead to successive and radical devaluations. And we do not have a big enough export market to gain."

Even Syriza shies away from any mention of the drachma. Stathakis said: "We are pro-Europe, pro-euro - we have never felt it necessary to discuss the drachma, never."

In fact, unlike the patriotism and rows about sovereignty in Spain, for example, Greeks are surprisingly compliant and pro-European. Even so they feel badly let down.

On the streets, Greeks lament that they do not understand the country's demise. But businessmen are taking up arms because they reckon they do understand - the bail-out agreements have crushed the Greek economy and the private sector and are close now to destroying it altogether. They scoff at Merkel's threats of disorder and catastrophe if Greece does not stick to its obligations, for them disaster has already arrived.

"Greece had bad habits and there was no question reforms were needed," said Vernicos. "But the reforms imposed in Greece have failed."

A fact uniting all businesses in Greece is that there is no financing - at all. Greek banks, already struggling, have been crushed, first by being strong-armed into buying Greek government debt and then by seeing 75% of it wiped out under the €205bn bond restructuring that was agreed as part of the second bail-out. "We don't have a banking system. The banks have lost 95% of their capitalisation," said Vernicos. "This is a huge failure."

International markets have demanded higher and higher rates of interest and now, with the latest expectation of the return to the drachma, have shut to most Greek companies altogether.

Kefalas said: "Because of the uncertainty that exits, trade credit has dried up and insurance has dried up, very large number of companies are closing down …we have a hell of a problem."

The collapse, he said, has been sudden and dramatic. Demand has evaporated - not just because of the ferocious recession, now entering its fifth year, but due to the sudden impact of the previously vast public sector purse being snapped shut.

"Unemployment has risen from 400k to very close to 1.1m - all from the private sector. In the public sector, wages have been cut, but the job losses are from companies shrinking or closing down."

Giannetos said he has cut his fashion business, founded 103 years ago, to the quick in order to survive. The company still hand-cuts its suits, as it has done since his father took him and his brother to Chicago as teenagers to learn the trade. But in just three years, instead of six shops there are just three; 53 employees have been axed to 35. Profits have plunged by 20% since 2009 and he has almost halved the price of his suits.

"Luckily we had a warehouse full of cloth and stock so we have survived because we have stopped importing the cloth from Italy and England," he said. "But energy bills are up, tax bills have soared. My landlord has halved the rent to stop his business closing down."

Vernicos said that his family shipping business is surviving because, like the rest of that Greek industry, it is a global business funded by global investors and markets.

But he has seen the decimation of businesses from the board of DEV, one of Greece's biggest electricity providers, where he has been drafted to help. The company, which is 51% owned by the Greek government, was the biggest company in southern Europe, he says, with 25,000 employees and a turnover of €6.5bn. It is now up for sale as part of the privatisation programme demanded by the bail-outs.

"When it was put up for sale it was worth €6bn, now it's worth €400m," he said. "Even the company's copper wires should be worth €3bn but the business is in bad shape."

He blames the collapse on the sudden imposition of extra taxes, but also badly thought-out crisis policies. Last autumn, the government extended the time for Greeks to pay their electricity bills from 30 days to 120 days - a move that led to the amount of unpaid bills soaring from €300m to €1.2bn overnight.

He said DEV is not alone. The impact of extra taxes plus a toxic uncertainty over the future of the country has pummelled the value of the Greece's portfolio.

"According to the memorandum, Greece has to sell 17% of its stock," he said. "When the sales were decided the portfolio was worth €1bn, today it is worth €60m. So you understand why privatisations cannot go on in Greece, they must stop until certainty returns."

The demand from Greek businesses is clear - whichever party is elected needs to re-negotiate the bail-out agreements. The talks cannot be one-sided, they argue, and require a fundamental re-evaluation by Brussels too.

Kefalas said: "Europe needs to make it clear it will support a unified Europe. Right now, different messages are coming out of Brussels - there are problems in Spain, Portugal, Ireland, Greece - how many problems have you got? It is very clear that the problem is a European one, made at the creation of the euro and those problems are coming home to roost."

He added: "As long as the markets view the euro, not as a single, unified currency but as an Italian euro, a Spanish euro, a Greek euro, the Greek economy will not stabilise. So we need the uncertainty to stop."

Vernicos said: "I am pro-European, I want pro-European parties to prevail to show to my European partners that Greece will honour its commitments but they must try to negotiate a better deal for Greece to make the memorandum more realistic. Give us more time. In order to make us more competitive they want to crush - push down prices, wages. We will do this but rather than doing it in 18 months give us two years; prolong the period of adaptation. As it is now, it is not realistic which is why people are voting against it."

Giannetos said he would vote for the mainstream parties, not Syriza, if only because "the only ones capable of sorting out the mess are the ones who got us into it".

But he is ready for change in Brussels: "Mrs Merkel is a politician of a certain mentality and ideology. But everyone has to change at the moment so she can. I think she can sense that the world is changing and a new strategy is going to be required in the EU."

But plenty of Greek businesses would settle for the low-hanging fruit of simply having a clear winner. George Tsakiris, president of the Hellenic Chamber of Hotels said: "What do we want the most? Peace. Our biggest hope is that there will be a government on Monday morning."