All eyes are on newly elected Greek PM Alex Tsipras’ high stakes negotiations with eurozone leaders this week. But the quarrel with the official lenders is not Tsipras’—or Greece’s—only problem, only its most immediate. As The Wall Street Journal reports:
By focusing on cutting political deals with the eurozone, he risks overlooking Greece’s real problem: its lack of access to markets. So long as investors continue to shun the Greek government, banks and companies, Mr. Tsipras has no chance of leading an economic revival, regardless of any restructuring of Greece’s debt.Under the troika program, Greece had started to regain market access, following in the footsteps of Portugal and Ireland. Billions of euros flowed to the government and banks last year, raising hopes that Greece could exit the bailout this year, albeit with the safety net of a eurozone credit line.The current political crisis has dashed those hopes for now. Mr. Tsipras demands the eurozone respect his electoral mandate, but his challenge is to win investors’ respect.
The best-case scenario for Greece in the event of a GREXIT calls for depreciation of the new drachma, followed by a rebound as the currency settles at a level that meets Greece’s economic realities. But all of that changes if investors have no confidence that Greece is a sane place to do business, whatever the price of its currency.As we’ve said before, since Tsipras’ ascension to office, Syriza has been spinning, but nobody’s buying. That apparently includes the markets, which is a very bad omen for Greece’s future—in or out of the eurozone.