Alexis Tsipras, Greece’s charismatic prime minister, has shown a fascinating talent for political maneuvering.
When an impressive electoral victory carried him to office in January, he inherited a horrid economic and financial situation. He initially struggled to gain control, and relations with creditors collapsed in an acrimonious mess. But as Greece teetered on the edge of an economic and institutional abyss, he repeatedly caught everyone off guard by taking charge of a narrative that was slipping away both at home and abroad.
Now, he may be able to deliver what many (including me) thought improbable: a policy deal that is acceptable to the majority of Greeks, the country’s European partners and the International Monetary Fund. Yet, as brilliantly as he appears to have navigated the crisis so far, he still faces an uphill battle that will determine his political legacy.
Last month, Tsipras surprised (and angered) Greece's creditors by calling a snap referendum asking Greeks whether the government should accept the tough terms of a bailout deal, with the understanding that a "No" vote could mean the country's exit from the euro.
Surprising many, he secured an impressive "No" victory; and he did so despite the burden imposed on Greeks by bank closures and capital controls. Then, on Thursday, he seemingly did a U-turn, proposing policy measures to his creditors that were similar to those rejected by his citizens in the referendum (and that don’t yet emphasize debt forgiveness, which is central to assuring a sustainable economic recovery for Greece).
Through it all, Tsipras obtained the support of other Greek political parties, strengthening his bargaining position both at home and abroad. In addition, he is now drawing some support from other peripheral European countries, which had been hostile to the idea that Greece could receive preferential treatment within the euro zone.
The net result is that Tsipras may be close to delivering a policy proposal that could be approved by the Greek Parliament and prove acceptable to European creditors and the International Monetary Fund.
That alone might secure Tsipras's place in the history books. But it is not yet clear whether his ultimate achievement will be to restore Greece as a fully functioning and viable member of the euro zone, or simply delay its exit until the government is in a better position to manage the disruption caused by a Grexit.
In the next few days, Tsipras needs to prevail with his creditors and obtain the resumption of European financing and greater Emergency Liquidity Assistance from the European Central Bank. At the same time, he needs to maintain calm in Athens now that a wing of his Syriza party (and some others) feel they have been betrayed. And he must move very quickly to reopen the banks, clear the debt arrears to the IMF and begin to reverse his country's highly damaging economic implosion.
The Tsipras government then faces a much more difficult feat that has eluded all of its predecessors: the sustained implementation of an economic policy package that involves continued budgetary austerity (including higher taxes), pro- growth structural reforms (yet to be clearly specified), as well as debt forgiveness from official European creditors (still opposed by some governments).
The prime minister has dazzled more than once by pulling a few rabbits out of his hat, but his grand finale lies ahead. His ability to pull it off will determine whether his reputation for political brilliance will be enduring.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author on this story: Mohamed A. El-Erian at [email protected]
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