Still No Exit for Greece

WASHINGTON, DC – Opinion polls in the run-up to Greece’s early general election on January 25 indicate that the left-wing Syriza party is likely to win the largest share of votes. As a result, Syriza stands to earn a crucial premium under Greek electoral law, according to which the party that gains the most votes is allocated an extra 50 of the parliament’s 300 seats. In other words, Syriza could come to power, with enormous implications for Greece and Europe.

Syriza is more a coalition than a unified party, meaning that its leader, Alexis Tsipras, must reconcile moderate socialists, including some of his economic advisers, with radical left-wing members. The implementation and impact of Syriza’s agenda, especially its decisive economic program, will depend on the new government’s ability to maintain support at home and compromise with Greece’s creditors abroad.

Syriza’s economic program rejects the austerity policies supported – or, some might say, imposed – by the so-called “troika” (the International Monetary Fund, the European Central Bank, and the European Commission). These policies require Greece to maintain a very high primary budget surplus – more than 4% of GDP – for many years to come.

Syriza also plans to demand a substantial reduction in Greece’s foreign debt, the nominal value of which remains very high – close to 170% of GDP. In fact, the real present value of the debt is much lower, given that most of it is now held by governments or other public entities and carries long maturities and low interest rates. Nonetheless, repayment “spikes” this year constitute a real short-term challenge.