Back to the real world

One thing to be said for the new Greek government is that it's capable of learning, and of learning fast. Just one week ago the election victors were posing as strongmen, rebuffing their European partners by making excessive demands for a debt cut, elimination of budgetary controls by the Troika and independence for the allegedly enslaved people of Greece.

After poring over the balance sheets, registering the actual figures and, above all, holding serious talks with their creditors in Rome, Paris, London, Brussels and Frankfurt, the radical leftwing head of government and his finance minister are finally starting to face the political reality.

Now we can talk – and we must. A compromise should be possible, in the interests both of Greece and of the whole eurozone. Alexis Tsipras is murmuring something about mutually agreed arrangements. Chancellor Angela Merkel has even said she's looking forward to her first meeting with the bogeyman of the eurozone at the EU summit meeting in Brussels next week. Greek Finance Minister Yanis Varoufakis has been acting prickly so far, but now he's even suggested a "Merkel plan" for reconstruction. An astonishing turnaround.

So the climate has improved. Now facts and concrete proposals must be put on the table. A debt cut is now out of the question: even finance minister Varoufakis admits that. It's not his top priority right now, anyway. The average term of the debts is 32 years at a low rate of interest.

Refinancing these could actually ease the long-term burden,but in order to do this Greece would have to pay off its relatively expensive loan from the International Monetary Fund ahead of time. It could do that with a fresh injection of money, which it could borrow under better conditions from the European bailout fund.

But that would mean entering into a third aid program, something the new government has until now rejected. The finance minister's bizarre idea of swapping Greece's old debts for unlimited debenture bonds is legally impossible and too risky for creditors. Greece could buy back these old debts, but that again would require cheap credit from the bailout fund.

In the short term, the European Central Bank (ECB) is keeping the Greek banks afloat with emergency loans – and with them the Greek state, to which most of the banks belong. But the ECB will only keep doing this if Greece accepts another bailout program.

No matter how they look at it, the new Greek government needs the European and international institutions; otherwise it will be bankrupt in a matter of weeks, or months at best, and will probably end up leaving the eurozone. Alexis Tsipras and his team appear to have understood this, and we can only hope they will act accordingly.

Realistic policies are needed

Their declaration that they will continue to implement reforms in Greece itself and make the tax system more efficient and fair is a mere platitude. Deeds must finally follow words. Time is running out.

There must at least be a provisional, credible restructuring plan on the table by February 28, otherwise the ECB may be forced to turn off the tap faster than Finance Minister Varoufakis would like. Capital flight on a massive scale began in Greece even before Syriza won the election. The Greek people voted for a radical U-turn, but they're also closing their bank accounts - to be on the safe side. Only ten days after the election, two Greek banks found themselves on the brink of insolvency and had to turn to the ECB for emergency aid. This should serve as a serious warning to the government in Athens.

The Eurogroup must also take steps to avert Greek bankruptcy. They don't have much scope to do this: not because they want to annoy the Greeks, but because Portugal, Ireland and Cyprus, who have also received bailouts, will immediately ask for better conditions if concessions are made for Greece.

The interesting question now is how Prime Minister Tsipras is going to explain his reversion to realpolitik to the Greek electorate. The exhausted Greeks have huge expectations of him. He must deliver successes, not least because the first cracks are already starting to show in the strange coalition between the radical leftist Syriza and the radical rightwing Anel party: The rightwingers are not willing to support the left's proposed citizenship law. Unless Tsipras manages to deliver at least some of the social benefits he has promised, his cabinet will quickly find itself in serious trouble.