Wright, Τ. (2015) “Will Syriza’s Victory in Greece Mean Easing Austerity?“, Newsweek, 29 January.
At the weekend, Syriza and its leader Alexis Tsipras won a clear victory in the Greek elections and have formed a coalition government with the small right-wing party Independent Greeks, which is also anti-austerity and anti-bailout.
Tsipras has a clear mandate to renegotiate Greek debt and its relationship with the European Central Bank (ECB). Much will be written in the coming weeks on the economic issues involved in the negotiations (for a very thoughtful post on that, read my colleague Doug Elliott). Here are three initial thoughts on the political dimension and consequences for the future of the eurozone.
- The belief that the broader repercussions of a Greek exit from the eurozone can be contained will make a Greek exit from the euro more likely, not less.
According to media reports, the German government believes that the eurozone could cope with a Greek exit from the eurozone much better than in 2012. Most analysts seem to agree. If the risk of contagion has decreased significantly (and it is hard to know for sure), it could paradoxically increase the risk of a Greek exit.
The reason is simple—the specter of Armageddon made everyone cautious in 2012. Greek voters took fright. The ECB would not have pushed Greece to the brink even if Syriza won. If today the ECB and Germany believe that the consequences of a Greek crisis can be contained, they will be less inclined to make costly concessions.
Relevant posts:
- Darvas, Z. & Hüttl, P. (2015) “How to reduce the Greek debt burden? – There are options to reduce the net present value of Greek public debt servicing costs by more than 15 percent of GDP without incurring losses on creditors, Bruegel Institute Analyses, 09 January.
- Xafa, M. (2014) “Lessons from the 2012 Greek debt restructuring“, VoxEU Organisation, 25 June.
- Wyplosz, C. (2013) “Messing up the next Greek debt relief could endanger the Eurozone”, VoxEU, 23 September.