The Comeback Boy

They did it again – Syriza became the strongest party at Sunday’s election in Greece. Rather then being a hair-thin close call, Syriza got 35.5% of the votes, followed by Nia Democratic with 28%. Tsipras is the most recent incarnation of a comeback boy, and in this case this is not least due to his campaign qualities extraordinaire that let Greek voters forget about his not as good qualities as PM. Back is also his previous coalition partner, the right-wing populist Anel party. With the 50 bonus seats due to its largest party status, this coalition may be back in a majority position that may get even more comfortable Tsipras reaches out to another small party of the center.

All this seems to promise stability, and thus a outcome European politicians may welcome. The best the EU could do at this point is to use the moment and offer Greece a further softening of its debt condition (given that an outright debt haircut is not in the political cards), provide it generously with extra funds for its dealing with refugees, reduce the expected primary budget surplus to 1% for the next few years or alternatively tie it to the growth rate of real GDP, prequalify Greek bonds for ECB purchases, and recapitalize Greek banks. Of course, nothing like this will happen, as this is the EU we are talking about. Experience tells that Brussels is more then happy to not experience open economic-political unrest in Greece, and thus moves back into its business-as-usual-approach.

A new Greek government will have to execute the conditions of the 3rd bailout program, and this program will be closely monitored. It is this outside-control of a detailed program that differentiates Greece from cases like Spain, Portugal, and Ireland where national governments enjoyed quote some leeway in regards to targets. Greece is the first member state of the Eurozone where economic-political micromanagement from outside is imposed on a nation-state. Any new Greek government will try hard to get back at least some control. and in this regard the next months are litmus test for national self-determination of a country that is part of a currency union. The test may come soon, as it seems that some of the favourable factors that currently work for the Eurozone may soon getting weaker or even may disappear: depreciation of the Euro, low energy prices, low real interest rates, and a still growing global economy. Should those factors move into a less favourable zone, Greek will quickly enter into difficult waters, and so will the crisis management of the EU.