GREEKS HAVE made their anger and anguish plain: By electing the ardently left-wing Syriza party to power this week, voters have rejected the harsh austerity measures — demanded by Germany and other wealthy European Union creditors as a condition of Greece’s 2010 bailout — that have thrown many Greeks into poverty, raised youth unemployment to around 50 percent, and carved government programs to the bone. It’s time for Berlin to heed the message before the confrontation throws the eurozone’s future into doubt.
For now, though, the Germans aren’t budging. “The Greeks have the right to elect whomever they want,’’ says Hans-Peter Friedrich, a senior official in German leader Angela Merkel’s right-centrist governing coalition. “We have the right to no longer finance Greek debt.’’ Each side appears to be waiting for the other to blink as deadlines loom for more bailout aid that Greece needs to pay its bills.
But the austerity program is undercutting Greece’s chances. Newly elected Prime Minister Alexis Tsipras warns that his country is on the verge of a “humanitarian catastrophe’’ as the result of cuts that have slashed the overall economy by a quarter, thrown many Greeks out of work, and killed spending on public schools, infrastructure, medical care, and other fundamentals. More flexibility is needed from the so-called troika of the European Commission, the European Central Bank, and the International Monetary Fund, which must consider ways to give Greece desperately needed breathing room by reducing interest rates and extending the deadlines of maturing loans. It seems unlikely that Greece’s creditors will write off any part of Greece’s debt, as Syriza leaders have urged. But there’s room for restructuring some eurozone loans, representing 60 percent of Greece’s overall debt, that would give Greece a better chance to escape from its morass.
Up to this point, the troika has wrongly insisted that Greece put total emphasis on paying off its debt rather than on stimulating growth — an austerity concept pushed by Merkel but falling out of favor elsewhere in the eurozone.
Still, while the troika needs to compromise, the situation also requires more politesse from Greece’s new firebrand leadership. One dangerous temptation is to skip out on some of roughly $363 billion it owes Europe and other creditors. That would perhaps win cheers from Syriza’s populist base, but also spur capital flight, result in bank failures, and otherwise do devastating harm to the country. Tsipras insisted this week that Greece will not default on loans, but will somehow exact a “moratorium’’ on debt payments. The distinction isn’t clear, and markets are nervous. Another risky step would be a Greek exit from the currency union. This would be hazardous for Greece while destabilizing Europe’s sputtering overall economy.
Tsipras also needs to adopt a more conciliatory public approach. In the view of many Germans, they’ve been subsidizing spendthrift Greek governments for years only to be vilified. Merkel faces intensifying political heat at home for committing billions of euros toward Greece’s bailout, and more antagonism from Syriza won’t help.
Greece’s new leaders should ponder bolder ways to reform the country — still plagued by corruption, bureaucratic ineptitude, and rampant tax evasion — without reneging on debt or bailing from the eurozone. The rest of the European Union, led by Germany, should be ready to make some concessions of their own to ease the hardships that caused Greeks to turn to Syriza in the first place.