Time to Put Up or Shut Up?

Talk is not cheap for the new Greek government. But it’s unclear when new Prime Minister Alexis Tsipras will dispense with market-rattling rhetoric and get down to negotiating the promises he made during his campaign.

While Tsipras has been shaking his fist at the painful austerity measures imposed by the European Union, depositors have been pulling their money out of Greek banks, selling their stocks, and demanding higher interest rates for loans to the government.

Now, as the new Greek officials meet with European Union leadership for the first time, they have the chance to make a compromise that will reassure markets that Greece isn’t going to reject the terms of the 240 million euro bailout in 2010 and drop out of the eurozone.

So far, Tsipras has shown no signs of conciliation.

“We are coming in to radically change the way that policies and administration are conducted in this country,” he said after taking office this week.

The new Greek finance minister, who has called the bailout “fiscal waterboarding,” made clear on his blog after the election that public office wouldn’t make him change tack or stop blogging.

“The time to put up or shut up has, I have been told, arrived. My plan is to defy such advice,” Yanis Varoufakis wrote Tuesday.

The brinkmanship is raising anxiety that only hurts Greece’s financial situation. While the new prime minister was campaigning in December, account holders drained 4 billion euros from Greek banks, according to data released Thursday. Additionally, bank deposits fell in October and November, suggesting uncertainty even before the Syriza party’s Jan. 25 landslide. The party has promised to confront European leadership over the terms of the country’s 2010 bailout.

Now in office, Tsipras and his new ministers have made fast work of tossing out austerity measures by rehiring laid-off government workers and abandoning plans to privatize ports, utilities, and roads. The Greek stock market responded by taking a nosedive, falling 11 percent on Tuesday and 9 percent on Wednesday. Greek 10-year government bond yields rose over 11 percent on Thursday, compared to 6 percent last summer. That means the value of Greek government debt is dropping and investors who hold onto the bonds are demanding higher interest rates.

But the real problem isn’t Greece’s private investors. The country owes far more money to its public creditors — the International Monetary Fund and the European Union.

And Tsipras has wasted no time rebuking European leaders in Brussels and Berlin. The Greek government threatened to torpedo not only the European bailout, but also the bloc’s sanctions against Russia for supporting separatist militias in eastern Ukraine. The Greek government eventually went along with the EU’s milquetoast decision to prepare further “restrictive measures,” but not before making clear that the new leadership wasn’t beyond holding European foreign policy hostage, the same as the zone’s financial stability.

Tsipras’s win in Sunday’s election demonstrated the depth of Greek voters’ anger over economic reforms that have led to laid-off government workers and higher taxes, even as the country’s GDP has fallen by nearly a third over the past seven years. One in four people are unemployed and more than half of young people don’t have jobs.

As a candidate, Tsipras vowed to reverse the tough economic reforms that came with the bailout, including cuts to budgets, pensions, and government jobs. Tsipras and his new ministers say they want to focus government spending on helping the poor, small businesses, and the unemployed while cracking down on waste and corruption.

But it’s not at all clear how the new government could accomplish those promises, given empty government coffers and a mountain of debt. In theory, the new Greek government could reject the bailout and leave the eurozone, but that’s not what Greek voters want — they overwhelming support staying with the currency union.

That’s the problem for Tsipras. It’s unclear how the new Syriza government will be able to ditch austerity without also ditching the currency union. And European leaders aren’t softening their stance on their rejection of the idea of forgiving Greece’s debts — a prospect that would anger taxpayers in other European countries. Many analysts expect Tsipras will eventually have to find a face-saving compromise.

“The idea that they have leverage on renegotiating the bailout is not serious when you think about their finances,” Mujtaba Rahman, the head of European risk analysis for Eurasia Group, said in an interview.

Tsipras and his finance minister are sitting down with the head of the eurozone’s group of finance chiefs, Jeroen Dijsselbloem, on Friday. All eyes will be watching to see whether he looks to strike a more conciliatory tone with his European lenders over the austerity demands.

But Rahman says the political rhetoric is likely to continue for a while longer before practicality wins out.

“They came to power on a wave of a populist anti-austerity movement,” Rahman said. “They can’t do a flip and do a deal with Europe on day three.”

ARIS MESSINIS/AFP/Getty Images