Eurozone in suspense as Greeks head to polls

Greeks head to the polls on Sunday (25 January) in an election likely to put a far-left government in power in the country most hurt by the economic crisis and the austerity measures linked to its bailouts.

The Coalition of the Radical Left, better know as Syriza, has kept its lead in polls in the run-up to the vote, with a five point margin on the ruling party, the centre-right New Democracy.

If Syriza wins and manages to form a coalition, it would create Europe’s first far-left government since the economic crisis.

But it might not be the last, with Podemos, another new, anti-establishment and left-wing party to contest Spanish elections this year.

Founded less than three years ago, Syriza has appealed to voters by attacking EU-mandated austerity.

"It’s actually quite remarkable that Greeks have backed mainstream parties for so long," said one Brussels insider, referring to the resentment people about the established parties, seen as corrupt and having led the country into the crisis in the first place.

Syriza leader Alexis Tsipras initially promised to "tear up" the Greek bailout pact with international creditors - the EU and the International Monetary Fund (IMF).

He also called for a post-WWII-type debt amesty conference in Europe .

He later nuanced his position, indicating he might settle for longer repayment deadlines and lower interest rates instead.

He said on Tuesday Greece will honour its bailout commitments and there is no question of leaving the eurozone.

But he was more bullish at his final campaign rally on Thursday, saying: "On Monday, national humiliation will be over. We will finish with orders from abroad.”

Fears Greece may stop paying back its debt had revived speculation of a Greek exit.

But, while markets are closely watching Sunday's vote, many experts no longer believe “Grexit” is a realistic scenario.

George Pagoulatos from the Athens University of Economics told an event in Brussels on Wednesday that Syriza's leadership has become more moderate.

But he noted that between a quarter and a third of Syriza MPs who are due to enter parliament are "left-wing anti-euro nationalists" will likely be a "constant stumbling bloc" for Tsipras.

With capital flight already a growing problem, he added that if Syriza wins, its main challenge will be to allay Greek depositors’ anxieties.

"They will have to provide reassurances to depositors that nothing serious will happen.”

Depending on the result, Syriza is likely to seek a coalition with the centrist-liberal Potami party or the Independent Greeks, a more nationalist, right-wing faction.

Pasok and New Democracy - the two establishment parties which hav dominated Greek politics for decades - are unlikely to get enough votes to make a government.

The even more extreme Communist and neo-nazi Golden Dawn parties are also likely to enter parliament.

But the new party of former prime minister George Papandreou i is polling below the three percent threshold. Papandreou has hinted at an alliance with Syriza if he does better, with Tsipras yet to respond.

"There is a serious probability there’ll be a very close majority because of the polarisation of voters", Pagoulatos said.

"Depending on how many parties remain outside the parliament, there is also a probability, I would say a significant one, that Syriza gets an absolute majority."

He added that Tsipras might be better off with a small win because it would be easier for him to make concessions and to integrate with "the European mainstream".

"If [the centrist-liberal] Potami is on board [in a coalition], it’ll be easier for Syriza to make this shift," Pagoulatos said.

Few believe Greek creditors would write off its debt, but the economist said they might be willing to link repayments to economic growth rates and that the EU and IMF might lower the 4.5 percent budget surplus which they ordered Greece to attain.

"Tsipras won’t emerge triumphant. He’ll have to compromise a lot. But the eurozone will have to give him something - some sort of debt relief," Pagoulatos said.