The notion that Germany was now comfortable and prepared for a Greek exit caused a stir, hastening media across the globe to assess how a Greek exit may occur, and what the likely consequences might be. Such catastrophic notions about a possible breakup of the EU have long since been a favourite source of agenda setting for news outlets operating outside the euro zone.
The dire consequences for the Greek people, the euro zone´s ability to absorb a Greek default, and the low level of exposure of European banks to Greece have all been explored ad nauseum. Yet little of the coverage has focused on the realpolitik that is likely to play out over the coming weeks and months.
From a German standpoint, the Der Spiegel article has clearly had the desired affect in sparking a surge of speculation and sending out a clear message that Germany is unwilling to accept any change in the conditions that have been agreed upon with previous Greek governments. Prior to the referendum in Scotland, Queen Elizabeth noted that Scots “ should think very carefully” before they voted. It was a subtle, yet pointed remark designed to tacitly influence the electorate. In this instance, the notion that a Greek exit would be a passable outcome for Germany and the EU is surely a ploy to cast a shadow in the minds of Greek voters before they go to the polls on January 25th.
From a Greek perspective, should Syriza win out, what are the likely outcomes? The premise of a Greek exit appear to be founded upon the notion that the new government will repudiate its debt obligations which would consequently lead the ECB to withdraw funding on which the country depends. Such a scenario would thus see Greece leave the euro and default on its debt. While this is possible, it remains extremely unlikely.
While Alexis Tsipras has risen to prominence on a radical platform that has been confrontational in its approach to Germany and the ECB, the realities of governance will likely necessitate that the Syriza leader softens his position. Indeed, Syriza are now likely to require a coalition partner, an eventuality that would most likely afford Tsipras sufficient wriggle room to sell a compromise to his support base.
Syriza´s primary objective will be to set Greek debt servicing on a more serviceable and palatable path. Syriza have embarked on a charm offensive with international media of late, with an article in the Financial Times this week asking .How radical is Mr Tsipras’ idea of a Paris Club-style debt restructuring? So radical that, according to three officials involved in the discussions, euro zone officials actively considered such a plan in late 2012.”
The bluster is likely to continue in the run-up to the election, but when all is said and done, mutual self-interest decrees that the main actors in this drama will likely end up posturing their way towards a mutually acceptable compromise.