A balancing act

A nightmare scenario for 2019 is weighing heavily on the minds of those who deal with Greece in the international markets and in many foreign capitals. This is perhaps why they are in such a rush for the country to return to relative normality in 2018 and tie as many loose ends as possible.

One dimension of this scenario has to do with the possibility of Greece lapsing into an extended period of having no proper governance. The political scene is already exceptionally fluid, with a good amount of activity taking place behind the scenes. The scenario of a new party merging to the right of New Democracy is being widely discussed, and it is obviously drawing some of its momentum from the resumption of negotiations over the name dispute with Skopje. The center-left is taking shape, meanwhile, but no one can predict whether it will have a different dynamic or not.

In the meantime, the government may decide to change the electoral law – again. In the current situation, there lurks the threat of the electoral law that has already been passed by the government and will take effect two elections from now. Except in the case that New Democracy wins an outright majority, most of the other scenarios point to a period of serious instability.

If Greece were Belgium, or even Italy, the dangers would be limited, but it is a country just coming out of intensive care and the “doctors” are not too sure whether it has really been cured.

Tsipras will soon come under pressure to make more handouts and to go back on many bailout obligations. The markets at the moment are looking at the positive scenario and ignoring the danger that Greece may roll backwards.

The government has been cautious so far, but it will be a big mistake to overestimate the pats on the back by European Economic Affairs Commissioner Pierre Moscovici and the positive messages from Berlin and Paris.

The markets have been burnt in Greece before and will remain skeptical. They will adopt a defensive stance at the first sign of a derailment and punish Greece with high borrowing costs.

The coming months will be crucial for the country. All of the Europeans, and not only them, are doing their utmost to keep us on our feet. The big danger is that we stumble. It won’t be the first time.