As Tsipras says that Greece won’t default on its debts, is a compromise still likely?

Alexis Tsipras, Greece's new Prime Minister (Source: Getty)

Dario Perkins, chief European economist at Lombard Street Research, says Yes

It’s hard to disentangle rhetoric and bargaining tactics from official “red lines,” but there is still scope for a mutually beneficial deal. The Troika could quite easily cut the future value of Greek debts by extending maturities and lowering interest rates, without imposing immediate losses on European taxpayers.

They have already hinted at such a solution, especially as Greece has kept its promise of achieving a primary budget surplus (a surplus net of interest payments). This would allow Prime Minister Alexis Tsipras to calculate some meaningful savings for the average Greek citizen and return to his country claiming victory.

But it would fall well short of Syriza’s election promises, and the difficult issue of what to do about structural reforms and austerity would remain. For the most part, investors are assuming reason and rationality will prevail, but there is certainly a danger that the authorities (on both sides) let philosophy and ego get in the way.

Ruth Lea, economic adviser to the Arbuthnot Banking Group, says No

Alexis Tsipras is between a rock and a hard place, entirely of his making. His election manifesto had a huge fault-line running right through it. On the one hand, he promised an end to austerity and meddling by the dreaded Troika and called for debt write-offs. But on the other, he swore undying allegiance to Greece’s continued membership of the Eurozone.

These objectives were glaringly incompatible and to suggest otherwise was cynically dishonest. It is simply inconceivable that the Troika will meaningfully relax the conditions for their financial support of Greece and concede an “end to austerity”. To do so would be to let down the Eurozone’s creditor countries and make a mockery of those other bailout countries which have rigorously stuck to the conditions imposed upon them.

Of course, the EU being the EU, there will doubtless be some face-saving “fudge”. But a major compromise on rewriting the rules of the club? I don’t think so.

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