Alexis Tsipras Europe’s Nightmare or Greece’s Last Hope?

Alexis Tspiras, the leader of leftist political party Syriza, has pledged to renegotiate Greece’s debt burden if he wins the crisis-plagued country's election on Sunday. But that could put Athens on a collision course with its international lenders.
Alexis Tsipras, Europe's bogeyman or Greece's white knight?

In Europe this week, all eyes are on Alexis Tsipras.

The leader of the leftist political party Syriza is poised to win the Greek parliamentary election this coming Sunday, something that could cause enormous change and even upheaval in both Greece and Europe.

Syriza is currently leading the ruling New Democracy party in the polls and the prospect of the anti-austerity party coming to power has revived dormant fears of a collapse of the euro zone.

The charismatic 40-year-old former communist wants to implement a radical program. For a start, he wants to end the austerity measures imposed by the so-called troika of European Union, European Central Bank and International Monetary Fund. And he has pledged to renegotiate Greece’s crippling debt burden, which is 175 percent of gross domestic product.

“We will end this tragedy that has threatened to choke our country for five years,” Mr. Tsipras has promised. If he wins, he could put Athens on a collision course with the international lenders, Germany in particular.

His stance has seen the possible future Greek prime minister become both an icon of the European left and the nightmare of many economists and policymakers throughout Europe.

If the country’s international creditors do not extend Greece’s bailout program, which runs out in February, then the country could default – something that could  trigger a Grexit, Greece's ejection from Europe's single currency, and even the break-up of the euro zone in its current form.

We will end this tragedy that has threatened to choke our country for five years. Alexis Tspiras, Syriza leader

While the majority of Greeks want to stay in the euro zone they also dearly want to see an end to the punishing austerity. Since 2008, the economy has contracted by a quarter and has only just returned to minimal growth. Unemployment is around 25 percent, while youth unemployment is a staggering 50 percent.

For many Greeks, Syriza’s election promises sound like the light at the end of the tunnel. The party wants to implement a wide-ranging stimulus program, including the creation of 300,000 new jobs, increasing the minimum wage to €751 a month while reversing cuts to pensions and public sector pay. He also wants to put an end to the hold oligarchs and corrupt politicians he says have on the country's economy.

Mr. Tspiras laid out the contours of his party program in a major speech last September in Thessaloniki. However, the full extent of Syriza’s political agenda is not yet known.

“It is not usual for political parties in Greece to present concrete election manifestos and to put them in writing,” explained Jens Bastian, an economist who was a member of the European Commission's Task Force for Greece until 2013.

Syriza has said its so-called Thessaloniki agenda will cost €11.4 billion. Mr. Bastian said there are serious doubts as to how that can be financed.

Mr. Tsipras has already toned down his statements. Johannes Müller, banker, Deutsche Asset & Wealth Management

The International Monetary Fund certainly doesn’t see any leeway for easing the austerity and reform measures. Structural changes in Greece have already stalled, according to the fund. It believes further concessions would be unfair to other member states that have bailed out Greece twice since 2010 with loans of around €240 billion.

But nothing is decided yet. Experts say that many voters will only make up their minds shortly before going to the polls on Sunday. The latest surveys put Mr. Tsipras’ Syriza alliance at 32 percent of votes, ahead of current Prime Minister Antonis Samaras’ New Democracy party with 29 percent.

 

Greece Ahead of the Election pt1-01 (2)

 

At the last elections in 2012, held at the height of the Greek debt crisis, Syriza came a close second to New Democracy. That defeat has left its mark on the ambitious politician who has headed Syriza since 2008. Now Mr. Tsipras is dialing it down, discarding some of the party’s most radical proposals.

In the previous campaign, Syriza had vowed to tear up the bailout agreement, end austerity unilaterally and if necessary default on Greek debt. There was also talk of exiting NATO and nationalizing banks. Those policy platforms are now gone, although Syriza does want to halt the privatization of state assets.

Mr. Tsipras has also made great efforts to win over European politicians and policymakers and persuade them that a Syriza victory doesn’t have to be seen as a calamity.

Most importantly, he doesn’t want to give the impression of jeopardizing Greece’s membership of the euro zone. After all, three quarters of Greeks say they want to remain part of the currency union.

Nevertheless, Mr. Samaras and his party are trying to play on the electorate’s fears of a Grexit, running TV ads titled “I won’t bear that risk.”

Mr. Tsipras has dismissed this as panic-mongering and argues that fears of a Grexit have already abated in the rest of the euro zone.

In Europe, there is indeed a growing realization that Syriza will probably win Sunday’s elections.

Germany’s finance minister, Wolfgang Schäuble, has already said that no matter who wins the vote, the government in Athens will have to ensure that the country continues on the right path.

 

Greece Ahead of the Election pt2-01 (2)

 

Meanwhile, the financial sector is divided on what the impact of a leftist Greek government might be. In London, many investment banks considerably reduced their investments in Greek after Syriza’s roadshow there in November.

In Frankfurt, the Greek opposition leader gets more favorable reviews. “Mr. Tsipras has already toned down his statements” says Johannes Müller, chief investment strategist in Germany with Deutsche Asset & Wealth Management. The banker expects Mr. Tsipras to alter his policies to ensuring that Greece stays in the euro zone.

It seems Angela Merkel agrees. Bloomberg reported that officials in Berlin say the German chancellor is convinced Mr. Tsipras will seek a compromise with the rest of the euro zone if he wins the election on Sunday.

After all Greece is due to run out of money by the middle of this year if it fails to agree on a deal. The hope is that this may prove enough of an incentive to scale back on the most radical demands.

 

Georgios Kokologiannis is an editor with Handelblatt's finance desk in Frankfurt. Moritz Koch is Handelsblatt's Washington correspondent. Siobhán Dowling, an editor with Handelsblatt Global Edition, contributed to this article. To contact the authors: [email protected][email protected].