Over the last few weeks it was becoming increasingly clear the efforts by Alexis Tsipras to portray his far- left Syriza party as a reasonable partner to the Eurozone had been effectively cutting into the anti-Syriza fear campaign being run by Antonis Samaras and his New Democracy party. And so it is no surprise that Syriza won with an even wider margin than the exit polls indicated in last night’s historic national elections (see SGH 1/12/15, “Greece: Syriza and its Eurozone Partners”).
*** The strong showing by Syriza, and even by the more extreme left KKE communist party and far-right Golden Dawn, is a clear repudiation of existing policies and a strong mandate for Athens to negotiate new terms with the Eurozone partners – within reason. That makes the rather curious decision by Tsipras to reach out first to the independent Greeks (ANEL) on the right wing of the political spectrum as coalition partners, rather than to To Potami (“The River”), as widely expected, including by us, all the more interesting.
*** We interpret the decision to reach out to ANEL first as a signal of commitment by Syriza to its anti-austerity promises, bypassing the fellow left-leaning but more moderate To Potami for a more controversial alliance across the political spectrum. They will reach out to To Potami, but as a second choice, and the clear sign is that the first and foremost order of business for Tsipras is negotiations with the Troika, even if it means partnering with what may ultimately be an unstable alliance partner.
*** This move is a signal to three different audiences: to the EU and European Commission that negotiations will be tough and for real; as a show of force to the other Greek parties in parliament that Syriza will neither seek nor require “adult supervision” in its talks from “moderates,” and; to appease the more radical anti-austerity wing of Tsipras’ own Syriza party.
*** As an immediate next step in negotiations with the EU, Tsipras has already indicated he may seek a “technical extension” of the Troika review slated to end on February 28, perhaps through June, in order to allow time to negotiate Greece’s debt obligations. This extension is likely to be granted.
*** But beyond these first hawkish signals from Tsipras in his coalition moves, we understand Tsipras may signal a slightly more conciliatory stance in his nomination for President to replace the outgoing Karolos Papoulias. The rumor in Athens is that the names under consideration may include, for example, one of two conservative former New Democracy cabinet officials. Furthermore, the critical post of finance minister is expected to go to Yanis Varoufakis, a relative moderate, at least by Syriza standards.
*** Ultimately, what is clear is that even the bulk of the Greek electorate do not expect, or frankly want, Tsipras to deliver on quite everything he has pledged to deliver. Dialing a few steps ahead on specifics, our understanding is and has been that any deal between the EU and Greece will likely center around a compromise on the primary budget targets in exchange for a lengthening of maturities, cutting rates, and perhaps even a temporary moratorium on Greece’s interest payments (see again SGH 1/12/15, “Greece: Syriza and its Eurozone Partners”). And as Greece is unlikely as things stand to meet the Troika’s 4.5% primary budget target anyway, EU officials will likely insist Tsipras commit to a more modest 1% or 2% goal as opposed to the 0% he has pledged as part of his campaign platform in exchange for easier debt terms.