A firm handshake for a shaky future.

Photographer: Milos Bicanski/Getty Images

Syriza's Tall Order for Greece

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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As expected, the left-wing, anti-austerity Syriza has won the Greek elections. Cue the speculation: what will this mean for Greece, and the euro?

Greece's Fiscal Odyssey

The Internet abounds with worthy pieces explaining that Greece would be absolutely mad to leave the euro; the result would be deep and immediate austerity as the country plunged into a financial crisis and a gruesome recession. In the end, they report, Greece has no choice: Negotiate hard, accept whatever carrots its rich northern counterparts are willing to offer in the way of easier debt terms, and plow forward with the fiscal and structural reforms demanded by its benefactors. No, no -- do not tell me how unfair this all is to a nation with 25 percent unemployment and a seemingly bottomless well of hard-luck stories. What will make the people of Greece the least miserable is neither here nor there. Unless the Greek government does what it is told, those hard-luck stories will get even harder.

The question is whether Syriza knows this, and is able to act upon it.

Even Syriza says it wants to stay in the euro, as do a majority of Greeks. Unfortunately, they also say that they want immediate and substantial relief of their debt obligations, which come to more than 170 percent of GDP. These goals are not really compatible, unless Germany does a dramatic about-face of the sort usually performed only by grasping corporate executives in Christmas specials. Syriza has been campaigning on a platform that it is very unlikely to deliver.

Of course, you can read this as a sort of elaborate negotiating tactic: Convince the Germans that you might really be crazy, in order to extract more concessions. Or the Fool's Gold version of the same story, where you actually are crazy, and therefore get most of what you want. Both of these outcomes seem unlikely, however. Giving concessions to the Greeks would probably trigger demands from other beleaguered southern economies for similar relief.

In a technocratic paradise, Syriza could settle for some small concessions, and then go back to the Greek public and announce that this was the best it could do. In the real world, where Greeks are very angry about having to slash their heating oil budget in order to pay off rich foreigners, that could be political suicide. Of course, so could sticking to its guns, and thereby engineering an unplanned exit from the common currency. Which of these terrible options will Alexis Tsipras, the new leader, choose? And if he decides to make a face-saving deal, will his party follow?

I've read a lot of confident pronouncements about what would be the rational course, but fewer informed analyses of what Tsipras thinks would be the best course. More, please.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
James Gibney at jgibney5@bloomberg.net