Over the past few months, Greek politicians and the so-called troika of international lenders—the European Commission, European Central Bank and International Monetary Fund—have contrived to put what progress Greece has achieved in doubt. The country now stands on a knife’s edge.
It is still possible that decisions over the coming days and weeks can return Greece to the stable path it was on before the radical leftist party SYRIZA topped the European Parliament elections in June, setting in motion the current turmoil. But the possibility diminishes by the day.
For this, SYRIZA leader Alexis Tsipras must take most of the blame. He spooked markets by turning a forthcoming parliamentary vote to elect a new president of Greece—a largely ceremonial position—into a vote of confidence in the government that he hopes will spur early elections and catapult him into office.
SYRIZA has recently been trying to re-brand itself to investors in New York and London as a mainstream pro-European party. Yet Mr. Tsipras has opposed virtually every overhaul and budget cut, standing consistently on the side of vested interests.
By refusing to cooperate with the government even on overhauls of the public administration and constitution that he accepts are urgently needed, Mr. Tsipras appears to embody all the worst aspects of the political culture he says he wants to change.
His economic strategy amounts to big increases in public spending, re-nationalizations and restoring public-sector jobs to be funded by debt relief from the troika—a program guaranteed to set Greece on a fresh collision course with the rest of Europe.
Listening to SYRIZA’s strategists, it is hard not to conclude that Mr. Tsipras would be the Hugo Chávez of the Balkans, his program modeled on that of the former Venezuelan leader.
Prime Minister Antonis Samaras must share some of the blame for the market’s loss of confidence. His ill-judged response to the SYRIZA threat has undermined the trust of investors and the troika. In June, he effectively fired the head of the tax administration, which troika officials suspect was evidence that Athens was going soft on tax evasion. He also shuffled his cabinet, promoting old-style populists to key posts.
Most damaging, Mr. Samaras overplayed his hand when he said in October that Greece would exit its bailout program early at the end of this year, putting itself at the mercy of markets. The markets quickly gave their verdict, tumbling on fears that, freed from the conditionality of official loans, Greece would abandon its overhauls and fiscal discipline.
The troika itself has hardly been blameless. The IMF in particular continues to extend its dismal record in Greece, following years of botched forecasts, misguided policies and unnecessary and damaging delays.
For the third time in three years, the IMF is holding up a crucial bailout review by pushing for further deep spending cuts that Athens insists will prove as unnecessary as they did in 2013 and 2014. It is also demanding deep overhauls to pensions and the tax system on a timetable Athens believes isn’t politically realistic.
The IMF may be right that this may be a last chance to exert real pressure on Athens to respect overhaul commitments—that if, following the current review, Greece is allowed to switch from a bailout program to a precautionary credit line the troika will have less power to influence Greek decision-making. But other troika officials increasingly fear that the IMF’s intransigence risks deepening the political uncertainty in Greece.
Source: The Wall Street Journal