It's a crisis but not like you think

THE victory of the Syriza party in Greece has led to media reports making it sound as though we are on track for a Mad Max distopia.

In the short term the support for the anti-austerity platform it campaigned on has already seen fluctuations in the money markets. This is only to be expected though. The thought that the eurozone may be forced to write off €240bn is not a pleasant one, least of all for Germany which has the most to lose.

Statements by newly elected representatives of the party that the debt is unrealistic and should be wiped fail to explain why the country a) needed the loan in the first place and b) why it was issued if it could not be repaid. 

The easy answers are that accumulated mismanagement of fiscal policies led to Greece's collapse and that the debt can be repaid but only through lengthy and painful austerity measures. 

Euclid Tsakalotos', Syriza's economic spokesman, declaration that "nobody believes that the Greek debt is sustainable,"  failed to add the addendum which will have gone through the minds of European Central Bank policy makers. It is only unsustainable if Greece does not radically change its attitude to spending.

A comparison can be drawn by an individual maxing out credit cards, overdrafts and getting into arrears in the mortgage. While they may not be able to pay off the full amount in one go they can look at restructuring the debt, cutting back expenses and paying it off gradually. If they decide not to do this and take out more debt to buy a new television and computers for the kids then the debt is going to be unsustainable.

The key difference, other than the obvious size of the debt, is that it is harder to repossess the Parthenon than somebody's car.

Mr Tsakalotos seems to have forgotten that the €240bn was a loan, not a handout. While he may be correct in thinking that economists would agree that the debt is unsustainable it is only this way because Greek authorities have allowed it to become so.

His belief that the rest of the Eurozone will cave in the face of economic uncertainty, rather than risk a possible, albeit unlikely, exit from the bloc, is a very large gamble to take. Germany has already signalled that it is likely to call Greece's bluff. 

This could be disastrous in the short term as the euro suffers but it would not necessarily mean the end of the eurozone though. In a very simplistic explanation as the euro devalues it will make it cheaper for countries, such as America and the UK, to buy products from the member countries. This in turn increases the amount of foreign capital entering the country and thus begins the long road back to stability and prosperity. The fundamental issue is whether the bloc has sufficient resources to prop itself up in the meantime.

This may well be a risk worth taking though as one of the alternatives is that Syriza gets exactly what it wants. This in turn would provide a boost to other anti-austerity and anti-EU parties, a risky business for the long term survival of the European Union as a whole not just the euro.