Greek elections: can Syriza get what it wants from Brussels?

It took Odysseus a decade to return to Greece from Troy and become king. It has taken Greek's left wing Syriza coalition three years to go from something barely recognisable as a modern political party to winning an election just a couple of seats shy of an overall legislative majority.

The Syriza phenomenon captures many things that are fundamentally wrong in Greece and in Europe and need changing. It also reflects well the rise of non-mainstream political parties across Europe as voters tire of "same old, same old" politicians. Another example on the left is Podemos in Spain, which is sympathetic to Syriza and, after just a year, topping the opinion polls ahead of national elections due later this year. But for all the campaign rhetoric by Syriza, we don't know yet whether its bark will be bigger than its bite in the face of strong resistance from its creditors, or whether its determination will prove to be ground-breaking for Europe. So how should we think about Syriza's victory the morning after?

There will be no Grexit—at least for the time being.

The election campaign in Greece has been accompanied by much speculation about whether a Syriza-led government would barnstorm into debt negotiations with Germany, the EU Commission, the European Central Bank and the IMF—the last three collectively known as the troika—and end up on a collision course. If so, this might then lead to Greece finally leaving the Eurozone—considered by most people to be a nightmare scenario.

While some commentators have suggested such an outcome might be more manageable now than in 2012, we should not make light of it. The consequences for Europe would be wholly unpredictable, bad, and best avoided. Greek voters don't want it to happen, Syriza doesn't, and Greece's European partners don't either. That doesn't mean it can't or won't happen since politics are often likely to trump economic reasoning when there's a lot at stake. But for the time being, all the indications are that Syriza has strong intentions and strong awareness of the need to engage properly.

Syriza's ambitious programme for economic renewal comprises two important strategies. First, it believes that decades of misrule by vested interests representing industry, the media and a professional elite are in large measure responsible for corruption, over-regulation, and dysfunctional institutions. It says it wants to implement a transformation of the Greek political system and institutions of government. A central theme in the party's thinking is that political and economic inequality are inextricably linked and self-feeding, and it is not possible to succeed in reducing the latter without tackling the former. This might actually play well in Berlin and Brussels, to the extent that Greece's institutional quality is a target for improvement.

Second, Syriza needs to work out how or whether it can deliver the programme it has promised. At home it wants to respond straight away to a humanitarian crisis, including measures to ameliorate home, heating and food deprivation, and in due course, to reverse austerity, increase the minimum wage, pensions and employment, and strengthen the collection of taxes and tax arrears.

In relation to Greece's debt, Syriza has called for a thorough renegotiation with its creditors of debt terms and conditions to put an end to what its leader, Alexis Tsipras, has called "fiscal waterboarding." Greece's total debt stands at about €317bn, or 175 per cent of GDP. Nearly 80 per cent is owed to the troika. As a result of earlier restructuring the average maturity of debt is now 16.5 years and the average interest rate is 2.4 per cent. In spite of these relatively favourable terms, the burden of debt is still crippling in an economy that is effectively in depression. Syriza wants the greater part of its debt written off, a link between debt servicing and its economic growth rates, a grace period before debt servicing recommences, and it would like public investment excluded from the eurozone's fiscal rules.

For the first time since the euro crisis began, then, there will be a serious test of wills between the eurozone's creditors and a major debtor. Negotiations will start very soon because there are outstanding loan tranches and repayments to be sorted out by 1 March, and larger repayments to the IMF in July and August. Most likely, technical agreements will be reached to extend or reschedule payments due. The crux, however, is that the troika creditors will come face-to-face with a Greek government that is quite different from its predecessors, which included factions and groups whose political interests were almost indistinguishable from those of creditors and of the policies they espoused.

Greece and its creditors could forge some kind of mutually face-saving compromise over the terms of the debt so as to manage debt servicing better, and offer Greece some relief. But it will be much harder to reach agreement regarding the policies of austerity and structural reform, and the more radical changes to living conditions that Syriza has campaigned on.

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Berlin and Brussels will be very concerned about making large concessions to Greece for fear of the substantial demonstration effect this will have on Spain, Italy, Portugal and other sovereign debtor nations. If they do back down significantly, they will lose control of the agenda. If they don't, they might only encourage more radical parties into government in other countries.

For its part, Greece may feel that it has already experienced extreme hardship in order to become financially more robust. The budget deficit has virtually been eliminated, the so-called primary balance (deficit excluding interest payments) is in significant surplus, the external deficit has tuned into a surplus, and some modest growth is returning. With a newly elected government in a strong position, Greece's political confidence will be far greater than it was at the time of its last major elections in 2012. At the same time, it doesn't necessarily want to risk the antagonism of its creditors, especially not the ECB, which must still give approval to emergency loans granted by the Bank of Greece, and which are keeping the Greek banking system afloat. Without that approval, there would be capital flight, a new banking crisis, and in all likelihood, acrimony leading to Greece's exit from the eurozone.

All we can say at this point is that if Greece's creditors capitulate, the floodgates will open for similar treatment elsewhere, causing huge anguish and discomfort in northern Europe to match relief in the south. If Greece backs down in the face of stern creditor resistance, the feeling of mistrust between north and south will become more corrosive and politically explosive. Syriza has won an important and meaningful victory, but do not expect Europe to quieten down.