Syriza would reverse structural reforms and even exit the eurozone. Can Europe entice it to stay?
The radical Syriza party, overwhelmingly favored to win the contest, has moved to center-stage from the political margins it occupied in 2010 by offering a vociferous critique of Greece’s bailout program. The unreconstructed leftists of Syriza are committed to write off a major part of the country’s public debt, 80% of which is now held by the country’s eurozone partners, the European Central Bank and the International Monetary Fund—the so-called troika. Syriza has promised to massively increase spending, cut taxes (except on the rich) and loosen fiscal targets imposed by the current program, though it is unclear by how much.
Syriza has also displayed contempt for the structural reforms in the labor and product markets designed to open up Greece’s sclerotic, overregulated economy to competition. The party wants to reinstate industry-based collective bargaining, increase the minimum wage to precrisis levels (more than twice as high as that of some eurozone countries) and put an end to privatization.
The likeliest result of the coming election is that Syriza will come out on top. But even with the 50-seat bonus that goes to the first party under Greek election law, Syriza is unlikely to have a majority in Parliament. If that’s how things play out, Syriza leader Alexis Tsipras will finally have to choose to either ally himself with the centrist parties and do his utmost to reach a deal with the troika, or seek the support of forces including the anti-EU Greek Communist Party to follow a strategy of collision with Europe’s “imperialists.”
Mr. Tsipras has repeatedly appealed to the Communists to join Syriza in a left-wing government that will remake Greek and—as he implies in his more febrile moments—European politics. The Communists have scorned his overtures every time. Still, there are enough people in Syriza who support the logic of “resistance” against Brussels and Berlin to make such a coalition a realistic possibility. If Greece’s new government does decide to go down that road, the country might well exit the eurozone.
Faced with this nightmarish scenario, the forces of the status quo—the government of Prime Minister Antonis Samaras and some European leaders—have opted to wage a campaign of fear. Mr. Samaras has warned that a vote for Syriza equals national bankruptcy, just as he did in the run-up to the June 2012 elections. Meanwhile Jean-Claude Juncker, the president of the European Commission, has said he prefers negotiating with “known faces,” and Germany has suggested that a Greek exit from the eurozone would be manageable.
The problem for Mr. Samaras is that the strategy of fear is bankrupt. His government, setting aside his promises to renegotiate the terms of Greece’s bailouts, managed to achieve a primary surplus and get the economy back into positive territory. It was the beginning of a long and steep climb in a country that lost a quarter of its gross domestic product during the crisis and where more than 25% of the people are unemployed.
But ever since Mr. Samaras’s New Democracy party lost to Syriza in May’s elections to the European Parliament, the government has faltered. Reform-minded Greeks have little to hope for from the incumbents, including the junior coalition partner, the center-left Pasok party, which has been in power for most of the past three decades.
Fed up with both mainstream parties, many voters are about to gamble on Syriza’s untested antibailout brigades. For that gamble not to prove calamitous for Greece, which could strike a potentially irreparable blow to the future of the eurozone, Mr. Tsipras will need to demonstrate rare political skill. He willl need to sell the idea of compromise—a bad word in Greek, and in particular in the lexicon of the Greek left—to the radicals within his party.
But he isn’t the only one who must abjure dogmatism. The Europeans must recognize that Greece’s fiscal targets are impossibly stringent. Primary surpluses of 4.5% of GDP for 2016 and for years to come aren’t consistent with a Greek recovery. The best way to loosen the reins is by rescheduling the bonds held by the ECB.
So as not to seem as if they are caving to the populists, and also because it is the right thing for Greece, the troika should insist that its price for this fiscal breathing room will be a commitment by Syriza to push ahead with structural reform. Easing the grip of cartels, powerful professional associations and public-sector unions will allow Greek entrepreneurs to finally flourish within their own borders.
Will Europe—above all Germany—rise above its narrow myopia to offer something like this? And will Mr. Tsipras have the wisdom and the agility to make it happen? A lot will depend on how those two questions are answered.
Mr. Palaiologos, a journalist at Kathimerini newspaper in Athens, is the author of “The Thirteenth Labour of Hercules” (Portobello Books, 2014).
