Greece's forked tongue on the euro: guest chart

http://www.ft.com/intl/fastft/329683/greek-syriza

FT.com

Dissecting the forked tongue with which Greek popular opinion speaks is a pre-requisite to making informed predictions on Greece. Alexis Tsipras, after all, epitomises populism.

It's a devilish task.

On the one prong, Greek support for the euro remains robust; on the other so does support for SYRIZA, whose policies, particularly on the primary surplus and roll back of structural reforms, are inconsistent with continued euro membership, writes Gabriel Sterne of Oxford Economics in a guest post for fastFT.

Analysis that focuses solely on SYRIZA ineptitude can be misleading.

The narrative places too much weight on opinion polls that show Greek support for euro membership still strong; views capitulation by Tsipras as inevitable; and emphasises SYRIZA's time-wasting tactics.

But we think support for the euro is more flimsy than opinion polls suggest.

The best way to characterise Greek popular opinion is "resigned" to seemingly endless economic misery.

There is universal anger over creditor-treatment given previous fiscal efforts. Resigned does not mean "past caring" but it is more than a step in that direction.

The chart below is a good example.

Support for Syriza has remained very strong, hardly affected by a sharp decline in support for the party's negotiating tactics.

Crucially, Greeks have continued to support anti-austerity policies even as it has become increasingly clear the Eurozone will not accept them.

One interpretation is that the Greek population is saying to Syriza "it didn't work, but thanks for trying, and keep it up."

Syriza's persistent lead partly reflects the high regard in which Greeks hold Alexis Tsipras, whose charisma is not widely understood outside of Greece.

Tsipras's robust approval ratings may lead him to pursue his anti-austerity stance beyond the wire.

For the time being, he cannot join the euro debate (yet) for to do so would trigger financial collapse.

Needless to say, the alternative narrative is bad news for Greek assets, for it means that Syriza capitulation is less likely, and exit more so.

There is a case for both narratives, but in our opinion the Greek bond market prices in relatively too much of the former.