Decision time for Greece
It's election time again in Greece, with the anti-austerity party, Syriza, ahead in the polls.
"The irresistible force is about to meet the immovable object," says The Spectator's James Forsyth. If, as polls suggest, the left-wing populist Syriza party wins Greece's 25 January election, "the eurozone crisis will move from a chronic phase to an acute one".
Syriza rejects the austerity and reform agenda imposed by two successive European rescue packages for Greece, and wants a deal to cut the country's massive debt pile, worth 190% of GDP.
Radical austerity has shrunk the annual budget deficit, or overspend, from 15% in 2009 to under 2%, but GDP fell by 25% in six years and youth unemployment hit 60%. Hence the support for an end to "fiscal waterboarding", as Syriza's leader Alexis Tsipras puts it.
However, Europe is "adamant that there will be no changes" to the terms of Greece's bail-out deal, says Forsyth, not least because voters in other countries would then be encouraged to opt for populist parties promising debt reliefor a loosening of their fiscal corsets.
The standoff implies that Greece might have to leave the eurozone before it can restructure its debts, with all the potential turbulence that implies. Germany seems to think a "Grexit" would be easier to contain than in 2012, given that banks are in better shape and a Europe-wide bail-out fund has been set up.
One bargaining chip that Greece has brandished is its primary surplus: it is running a budget surplus before interest payments, which means that it could theoretically finance itself out of taxation if it defaulted on its debts. But asJohn Dizard points out in the FT, there is far less to this argument than meets the eye.
For one thing, there is, as ever, "considerable doubt" about Greece's dodgy statistics (the official primary surplus is only very small). And the bargaining chip loses power if Greece is unlikelyto be able to maintain its primary surplus for some time yet it will soon have to bolster the banking system, and make good on the expenditures promised during the election campaign.
While the euro crisis form book suggests some sort of giant face-saving fudge is on the cards, the future make-up of the single currency could hinge on whether Syriza has to find a coalition partner or not.
An outright victory would embolden the party's uncompromising far left, its most disciplined faction, says Tony Barber in the FT. A coalition including a moderate centre-left party, by contrast, "would provide Tsipras with the perfect excuse" to defy his militants and cut a deal with creditors. The latest polls, to Europe's relief, point to power sharing.