Greece's Syriza may soften policy to form coalition

Significance

Voters may return a left-leaning coalition led by the Coalition of the Radical Left (Syriza), which has pledged to renegotiate the country's massive debt and roll back many of the reforms that have been the 'quid pro quo' for EU/IMF bailout loans over the past four years. At issue is whether to continue the austerity policy necessary to fulfil the second economic adjustment programme (EAP), realise its final loan disbursements and negotiate a new loan package to provide a back-stop, as Greece seeks to return to borrowing in the market place. The EAP's fifth review must be concluded to secure release of its penultimate pay-out. The programme has been extended until February 28, allowing post-election negotiations.

Impacts

• A Syriza-led government would, at a minimum, throw into question the conditionality attached to lending under the existing EAP.
• If Syriza persists in trying to secure a write-down of Greece's massive debt, there will be political confrontations with EU member states.
• Such confrontations would severely compromise vestigial goodwill towards Greece.
• If a write-down cannot be achieved and Athens defaults on part of its debts, Greece will quit the euro and return to a national currency.