Clarion calls of confrontation roiled through the E.U. after the state election in Greece on January 25, 2015. Would the E.U., heavily dominated by its largest state, and the European Central Bank (ECB) accept a larger public deficit (i.e., more government spending to alleviate the austerity) and continue the cheap loans, or would Alexis Tsipras, the new Greek prime minister, have to choose between continued austerity and default?
In the election, the Syriza Party, the anti-austerity party in Greece, came close to an absolute majority in the state legislature. On the one hand, “Europe’s political establishment sought to show respect for the will of the Greek people.” On the other hand, officials of other states—most notably Germany—portrayed a public face at least of holding the new Greek government to the current agreement. “There are rules, there are agreements,” German finance minister Wolfgang Schäuble declared. Rep. Esteban Gonzalez Pons gave a distinctly federal perspective in worrying out loud whether relaxing Greece’s austerity would encourage “radical” parties in other states to gain power in order to go back on austerity/loan agreements. According to the Wall Street Journal, “(t)hose opposed to relaxing the burden also worry that the electoral success of the leftist Syriza party, which surpassed many expectations, could energize other populist movements elsewhere in [the E.U.].”
Of course, Schäuble’s could be sheer posturing before the anticipated arduous negotiations, and Pons’ conclusion that the E.U. could be “dismembered” should radical parties gain power at the state level is itself rather extreme. Furthermore, a decision at the federal level (including the ECB) and at lender state capitols to relax the “rules” on the allowable Greek deficit would not necessarily start a cascade of unraveled deals involving state debt and deficits. Such a change of government as occurred in Greece is not easy, and thus not easily “cascadible.” In other words, the populist parties in other states would still have their own heavy lifting to do, and that in itself, and the voters’ consent, would connote legitimacy and thus, theoretically at least, respect in other states and at the federal level.
Put in terms of negotiation, even Greece’s creditors must acknowledge the legitimacy of the Greek vote. In particular, it could not reasonably be contended that the Greek position should be unchanged. In other words, the area subject to negotiation shifted. This is not to say that the official (public) creditors would have to give in at all. Politically, Tsipras would have to decide whether to take on the factions in his party that want Greece to drop the euro (as he would do by compromising), or risk losing the “stream of cheap financing,” which in turn “ensures that Greek banks have access to cheap funding from the European Central Bank.” Compromise could eviscerate his credibility among voters in the state, while holding firm to ending the austerity could mean default and whatever would ensue from it.
Even in the face of such a dramatic shift in government in one state, talk of the “dismemberment” of the E.U. strikes me as overblown. Even putting Tsipras’ political calculus in such stark terms as compromise vs. default may set up a false dichotomy. Even a huge shift in government must somehow reckon with the gravitas of governing (i.e., practicalities), which has a way of smoothing out what might seem on election night like a historic change on the verge of happening. Accordingly, the volatility in the markets and the drop in the euro likely reflected irrational exuberance more than any fundamentals.
 Matthew Karnittschnig and Gabriele Steinhauser, “Europe, Greece Dig In Over Debt,” The Wall Street Journal, January 27, 2015.
 Charles Forelle, Nektaria Stamouli, and Alkman Granitsas, “Greek Vote Sets Up New Europe Clash,” The Wall Street Journal, January 26, 2015.