Syriza, Not Greece, Should Head for the Exit
As Greece stumbles toward an exit from the European Monetary Union, it may still have a chance to avert calamity -- on one critical condition: If snap elections were held to replace the Syriza government with one that would bring some reason to the negotiations with international creditors.
At first glance, this idea may seem a little far-fetched. The leftist party, which came to power with a promise to end the austerity of the past several years, remains popular (it has the support of 47.8 percent of Greeks, a plurality, according to a poll last month by Metron Analysis). And Finance Minister Yanis Varoufakis had reason to tell the Huffington Post last week that Syriza would sweep an election if one were held today. Yet, when it comes to money, people's self-interest can sometimes trump their political affinities.
In Russia, for example, anti-Americanism didn't prevent the supporters of President Vladimir Putin -- who enjoyed an 85 percent approval rating -- from rushing to buy U.S. dollars when the ruble plummeted in December. Similarly, in Greece, Syriza's popularity hasn't stopped depositors and investors from pulling tens of billions of euros out of the country. Rather than showing their trust by keeping their savings in Greece, people are taking care of themselves as best they can.
So what will happen if Greeks are ultimately faced with a choice between Syriza and membership in the euro? There have been signs they could vote with their wallets. Only 45 percent of Greeks, for example, still back Syriza's strategy in talks with international creditors, compared with 72 percent in March. The euro enjoys broad-based support: A poll late last month showed that 84 percent of Greeks wanted the common currency, and only 13 percent wanted to go back to the drachma.
It would probably take a shock -- such as the chaos of a default to the International Monetary Fund -- to convince Greeks that Syriza is not coping and that a change is needed. Even then, however, the European Union, the European Central Bank and the IMF may find it difficult to continue backing the country through a political process with uncertain results. Yet they probably would. European Commission President Jean-Claude Juncker said in an interview with Politico, published today, that Greece would not be allowed to drop out of the euro area: "We are prepared for all kinds of events but I am excluding at 100 percent this Grexit, or Greek exit."
Countries are more resilient than one might think. Despite Greece's desperate plight, life goes on there, people keep working, businesses make money and pay taxes. The IMF has been known to wait for its money -- as of March 31, its members countries' arrears stood at $1.8 billion. Those funds were owed by Somalia, Sudan and Zimbabwe, but a European country, Serbia, had also been in arrears for a while before it paid the debt.
Greece will not cease to exist if it misses some payment deadlines. Keeping it in the euro area and the EU is a political decision, and Greece's creditors will only cut the country some slack if it can field a negotiating partner that is more grown-up than the grandstanding, reality-ignoring, desperately inept Syriza government. It's up to Greeks to provide one as soon as possible.
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:
Leonid Bershidsky at email@example.com
To contact the editor on this story:
Mark Whitehouse at firstname.lastname@example.org