Syriza for Greece Doesn’t Mean Leaving the Euro

By Andre Tartar and Marcus Bensasson

Photographer: Kostas Tsironis/Bloomberg

Alexis Tsipras, leader of the Syriza party, waves from the stage during his address to... Read More

Greece is staying in the euro area.
That’s the view of economists in a Bloomberg survey as the anti-austerity Syriza party appears set to take power after elections on Jan. 25. They say there’s an 80 percent chance that Greece sticks with the euro even if Alexis Tsipras forms a majority government. More than half of respondents see Greece getting debt relief, whoever wins.
Syriza, which leads Prime Minister Antonis Samaras’s New Democracy party in opinion polls, is retreating from the rhetoric that unnerved investors, for example stressing a commitment to fiscal prudence and pledging no unilateral decisions will be taken on obligations to creditors. Greek government bond yields that soared last year have since declined as the threat of exit from the euro was seen to recede.
Many of Tsipras’s policies “are unlikely to be accepted by the troika of international lenders, despite Syriza’s position having moved to the center in recent times,” said Diego Iscaro, an
economist at IHS Global Insight in London. “But it would not be the first party to become more pragmatic once in power.”
Greeks worn down by years of wage cuts and tax increases have flocked to Syriza, which is promising to write down some of the national debt and roll back austerity. That puts the country on a collision course with the European Commission, the European Central Bank and the International Monetary Fund, which have kept Greece afloat with bailout loans since 2010.

Exit Risk

Syriza’s steady lead of about 3 percentage points over New Democracy suggests the party will fall short of the votes needed to govern alone.
There’s a 15 percent chance Greece will leave the 19-nation currency union if Tsipras forms a coalition government with one of the centrist parties, the Bloomberg survey shows. That compares with 5 percent under an alliance led by New Democracy.
The risk increases to 20 percent if Syriza gets an overall majority, compared with 5 percent under a New Democracy majority, the poll shows.
Eighty-seven percent said a victory for Tsipras, either alone or in coalition, would result in debt relief for Greece. Fifty-seven percent said the same of a Samaras victory.
Greek bonds rallied this week, with the 10-year yield falling a percentage point to 9.1 percent, suggesting investors are becoming more sanguine about the prospect of a Syriza government.
European officials, including Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem, suggested this week more could be done to ease Greece’s debt burden, the largest in the euro zone at about 180 percent of gross domestic product.

Compromise Needed

“Compromise is not as hard as it looks,” said Alan McQuaid, chief economist at Merrion Capital in Dublin. “Syriza does not have a democratic mandate to take Greece out of the single currency. It may have to form a coalition to govern, requiring compromise even on its flagship policy. And Europe can give.”
Among the 13 percent of economists in the survey who see no debt relief for Greece, whatever the election result, is Danae Kyriakopoulou at the Center for Economics and Business Research in London.
“Debt relief is unlikely given the moral hazard issues associated with it and the potential demands for debt relief elsewhere in Europe,” she said. “I sincerely hope to be proven wrong as it is our view that some is necessary for Greece to achieve a sustainable route to recovery.”