Now that negotiations have broken down in Athens, and there will be another election, we face the prospect of an almighty staring contest. On one side, the Eurocracy, who will be urging Greek political parties — and particularly the left-wing coalition Syriza, which is ahead in the polls at the moment — to soften their anti-austerity stance. On the other, the Greek politicians, who might be hoping that the eurozone relents to some extent, and allows the cuts to be decelerated. The question is: who will blink first?
As it stands, it’s difficult to come up with an answer. The leader of Syriza, Alexis Tsipras, is unlikely to blink over the next few weeks at least, as it is Syriza's opposition to the Brussels-determined cuts that made it popular in the first place. And European leaders such as Angela Merkel will surely want to keep their eyes wide open too. After all, they won't be particularly eager to explain to their own voters why a more mutinous Greece is being treated with greater leniency. Indeed, the German rhetoric thusfar has more been about cutting off financing to Athens, than loosening its conditions.
But if no-one blinks in the end, what then? As the Greek politician Theodoros Pangalos put it to the Telegraph last weekend, there would be a very real possibility of Greece running out of money:
‘There is a school of thought that says the Germans are bluffing. They need Greece and will never throw us out of the eurozone. But what will happen, which is almost certain, is they will not give us the money to pay our debts.
We will be in wild bankruptcy, out-of-control bankruptcy. The state will not be able to pay salaries and pensions. This is not recognised by the citizens. We have got until June before we run out of money.’
Much now rests on the political mood in both Germany and Greece, over the next month or so. If Greece is to remain in the euro, then it will probably take either Merkel deciding that a euro break-up is worse for her than carrying the deadweight of Greece through the next decade, or Tsipras deciding that he can't bring his country to the edge after all. Someone would need to blink. But, like I say, there are few signs of that happening at the moment.