The key player in Greek politics right now is Alexis Tsipras, the 37-year-old leader of Syriza, which has unexpectedly emerged as the second-largest party in Greece. Tsipras has refused to participate in a grand coalition, and so now Greece is headed to a second election — and Syriza might come out of that even stronger. Matt Yglesias looks at what Tsipras wants:
On the face of it, his policy makes no sense. He says he rejects the EU-imposed austerity program but wants to stay in the Euro and in the European Union. But Greece has a large primary budget deficit and no source of market financing. The EU is insisting on an austerity program, but it’s also giving them cold hard cash in the interim. Reject the austerity program and you lose the EU/IMF money and need to implement an even harsher austerity program. Tsipras is a bit like a guy standing in your living room threatening to blow his own brains out unless you pay him money, a proposition he offers on the theory that you’d rather not see your furniture ruined.
Of course, what Tsipras wants and what he’ll be willing to take when he sits down with euro zone officials are very different things. The major development in the last few days is that euro zone officials are publicly talking about how they’d manage a Greek exit — or, as folks are calling it, a “grexit.” As Yglesias puts it, they want to convince the Greeks that “Tsipras can shoot himself if he likes, and nobody will stop him. The hope is that faced with the decision, he won’t pull the trigger and eventually a coalition grand enough will emerge to tell the Greeks to be ‘responsible’ and accept the austerity.”
Over at FT Alphaville, they’re rounding up opinions on what a “Grexit” would mean for financial markets. It’s not pretty. The question is whether, at this point, it’s actually inevitable. If I’m reading him right, I think Mohammed el-Erian thinks it is. But note that this isn’t the first time we’ve been told that the end game is near only to watch Europe figure out a way to avert crisis and muddle along.