Greeks Are Divided on Way Forward

Left-Wing Party Vows to Halt Cuts While Staying in the Euro, but Europe Isn't Bending

By JAMES ANGELOS

The Wall Street Journal

ATHENS—Greece's radical left party has upended the country's politics with an idea as simple as it is seductive: Athens can renege on the deals it made in exchange for a bailout, and still remain in the euro.

Greece's future, and possibly that of Europe's monetary union, may depend on how many Greeks buy into the idea.

The Coalition of the Radical Left, known as Syriza, is competing with Greece's conservative New Democracy to become the biggest party in Parliament in June 17 elections that could send further shock waves through Europe.

Several opinion polls published over the weekend put the upstart Syriza behind the conservatives by between 1.3 and 5.7 percentage points. But the surveys are volatile: They underestimated Syriza's support in Greece's May 6 elections, whose inconclusive outcome forced a second ballot. With three weeks of the campaign left, the race is wide open.

Syriza leader Alexis Tsipras, a 37-year-old former Communist youth activist, promises that despite its dire financial straits, Greece can halt austerity programs, restore social spending and nevertheless continue to receive the payments from the euro zone and the International Monetary Fund that keep it from bankruptcy.

The repeated warnings to the contrary from Europe and the IMF are simply efforts to blackmail Greece into doing what they want it to do, Mr. Tsipras says.

Under Greece's electoral system, the party with the most votes gets 50 bonus seats in the 300-seat Parliament, putting it in pole position to lead the next government. The boyish Mr. Tsipras is thus a potential prime minister, if his party wins more votes than the conservatives.

Mr. Tsipras got an unintended boost over the weekend from IMF Managing Director Christine Lagarde, who expressed her limited sympathy for Greece's pain under austerity in an interview with British newspaper the Guardian. Ms. Lagarde blamed Greece's budget mess on Greeks who evade taxes.

Her comments caused widespread anger in Greece, feeding the resentment of the country's creditors and their tough demands that is contributing to Syriza's rise.

"The last thing we seek in Greece is her sympathy," Mr. Tsipras said on Sunday. Ordinary Greek workers pay heavy taxes, he said. "For the tax evaders," he said, Ms. Lagarde should ask Greece's established parties "why they haven't touched big capital and have been chasing the simple worker" with austerity measures.

Syriza's message offers an alluring way out of the dilemma facing Greece: austerity and long-drawn-out debt repayments, or an abrupt default and return to the drachma.

But European leaders including German Chancellor Angela Merkel have said repeatedly that Greece can't have it both ways: If it wants to stay in the euro then it needs financial aid—and that comes with strings attached. Political leaders in Europe's creditor countries say they won't fund a Greece that won't enact painful overhauls. If Greece's rescue loans are suspended, Athens would soon run out of money to operate public services and prop up its ailing banks.

As the vote approaches, Greeks are debating whether Syriza's promise to spurn austerity and stay in the euro is too good to be true.

"This is what they say, but I don't know whether to believe it," says Vassilis Tzoumas, a 24-year-old doctoral student in electrical engineering who voted for Syriza on May 6. That choice, he says, was motivated largely by anger at the corrupt practices of Greece's political establishment. He hasn't decided yet whether to vote Syriza again, he says, because he is concerned about the risk of Greece crashing out of the euro.

Such doubts are partly behind the tilt toward New Democracy in the most recent opinion polls. The conservatives are trying to turn the election into a referendum on Greece's euro membership. New Democracy, led by Antonis Samaras, is presenting itself as the responsible party that will ensure Greece stays inside the currency bloc.

Syriza's opponents say the party is simply riding a wave of anti-austerity sentiment without offering a viable plan to address Greece's deep-seated economic problems. Mr. Tsipras, say critics, advocates the same policies of patronage that got Greece into trouble: tightening labor protections and preserving the bloated public sector.

"He has basically promised everything to everybody," says Vassilis Karatzas, an Athens-based fund manager at Levant Partners, who predicts a 70% chance of a euro exit if Syriza comes first in the elections.

Syriza counters that Greece's creditors are using unwarranted fear of expulsion from the euro to bully the Greek people into swallowing destructive austerity measures.

"They say we will burn alive and go to hell" if Greece renounces austerity, Syriza member Spyros Tzokas told a meeting of party supporters one recent evening in Athens. Europe's threats about euro exit are only meant to scare Greeks, Mr. Tzokas, a history professor, said.

Mr. Tsipras argues that Greece has untapped bargaining power, which it should exploit to dictate a new way forward.

"The big weapon of Greece in this moment is that the European banking system will collapse if the Greek financial system collapses," Mr. Tsipras said in a recent interview with The Wall Street Journal. "There are no borders between the states," he added, speaking of Europe's "interconnected" banking system.

Syriza supporters say the party is fighting not only for Greece's future, but also for a fairer euro zone.

"We want Greece to stay in the euro, but in a different way, with a different euro," said Kostas Panopoulos, a 50-year-old accountant, as he sat outside a tavern in Athens' Exarchia neighborhood, a left-wing stronghold. The euro, he said, can't be merely the Deutsche Mark writ large. "We need a new balance" in Europe, he said.

If Mr. Tsipras becomes prime minister, he will have to reach a deal with German Chancellor Angela Merkel to win continued funding for Greece, he acknowledges. "That will be no easy negotiation," the Syriza leader says.

Since Greece's May 6 elections, Ms. Merkel has repeatedly said she wants to keep Greece in the euro—but that the country must stick to its promises and overhaul its budget and economy, despite the pain.

Syriza leaders are defiant. "The euro does not belong to Germany, to Ms. Merkel and [German Finance Minister Wolfgang] Schäuble," says Zoi Konstantopoulou, an attorney and Syriza candidate who won election to Parliament this month. "The euro is the collective property of the European people," she says.

Rejecting fears Greece might go bust if Syriza wins the elections, Ms. Konstantopoulou says Greece "is not an enterprise, but a nation" whose democratic will must be respected.