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Reforming Greek Reform

PRINCETON – Greece's new government, led by the anti-austerity Syriza party, presents the eurozone with a challenge that it has not yet had to face: dealing with national officials who are outside the traditional European mainstream. Syriza is in many ways a radical party, and its views on economic policy are often described as hard left; but the party's take on debt and austerity is supported by many perfectly mainstream economists in Europe and America. So what sets Syriza apart?

All negotiations between debtors and creditors involve bluff and bluster to some extent. But Greece's maverick finance minister, Yanis Varoufakis, has taken his case boldly to the media and the public in a way that leaves little doubt as to his willingness to play hard ball.

One might expect that the negotiations between the Greeks and the "troika" (the European Commission, the European Central Bank, and the International Monetary Fund) would be mainly about reaching an agreement about the economics of the situation. But that would be wishful thinking. The Germans, along with smaller creditor countries, are dead-set against any relaxation of austerity and are adamant that “structural reform" must remain a condition of further financing. They think that offering easier terms would be economically counterproductive, not least because it would give the Greeks an opportunity to go back to their bad old ways.

So what is unfolding before our eyes is not a rational discussion of economics but pure haggling. And just about the only bargaining chip that Varoufakis holds may be the implicit threat that Greece could leave the euro ("Grexit"). The threat is only implicit; most Greeks do not want Grexit, and Varoufakis and Prime Minister Alexis Tsipras have shied away of late from stating such intentions. But, without the threat, Varoufakis's claims of democratic legitimacy would most likely fall on deaf ears in Berlin, Frankfurt, and Brussels. Syriza would have no choice but to continue the economic program it was elected to revoke.