The refusal of Syriza's leader, Alexis Tsipras, to accept a Greek commitment to spending cuts was reportedly a key reason the coalition talks failed. The popularity of Syriza, which rejects Brussels' demand for austerity measures in exchange for a 130 billion-euro ($165 billion) bailout, grew some 11 percent — to 27 percent — over the course of the negotiations. Syriza's strategy has been to attract the vote of the center-left electorate, which does not oppose Greece's membership in the eurozone but which seeks a reduction in international pressure on Greece.
This spike in Syriza's popularity follows the worst performance ever by Greece's traditional political parties in the May 6 elections. There will likely be a further weakening of these mainstream parties in the new elections.
Should Syriza manage to secure leadership of Greece's next government, it would try to exploit the political shift that Francois Hollande's victory in the French presidential election seems to represent in Europe. The Greek party hopes that the French Socialist's win will create an opportunity for Europe to lessen the pressure for austerity on Greece.
Syriza is also confident that the fear of instability in Europe resulting from a Greek departure from the eurozone will be enough to win concessions from Brussels on austerity. Europe's main concern at this point is not necessarily a Greek exit from the eurozone, but the consequences such an exit would have on bond yields of other, larger countries at risk, such as Spain, Portugal and Italy. In the past few weeks, markets have targeted Spain because of the weakness of its banking system, and more uncertainty in the euro area would only increase Madrid's fragile situation. The European Union has tried to calm markets by saying the rest of the eurozone could manage a Greek exit, but in truth the consequences of such an event are mostly unknown.
If Syriza is chosen to lead the next Greek government coalition, its room for maneuver will be limited. First, Athens needs the European bailout. Without it, Greece could run out of funds in less than a month. The European Union has made clear that it will not release new tranches of the loan until Greece agrees to comply with its commitments to austerity. Moreover, Hollande's calls for growth measures in the eurozone do not necessarily mean that France is willing to back a defiant government in Athens.
In addition, although the Greeks reject austerity, recent opinion polls showed that eight out of 10 Greeks want to keep the euro. Any new government in Athens will have to address this contradiction: a society that wants the benefits of eurozone membership but refuses to pay the costs it entails.
The European Union fears that an eventual Greek exit from the eurozone would put unbearable market pressure on other, larger countries, which could not be saved with the funds currently available. Greek politicians, in turn, need the European funds to keep the country functioning. Although they are pushing their crisis with the European Union to its limits, Greek political officials will eventually seek a compromise that allows them to continue to receive much-needed funds.
