A Greek Reprieve

[WestVirginiaRebel]

Wall Street Journal:

Europeans—at least the non-Germans—breathed a sigh of relief Sunday as a plurality of Greek voters took a step back from jumping out of the euro zone. Now we'll see what Europe's leaders can do with their latest reprieve.

Tallies as we went to press Sunday indicated the center-right New Democracy party won some 29.5% of the vote, up from its 18.8% showing last month. New Democracy told voters it wants to remain in the euro zone while claiming it would be better able to renegotiate the terms of the Greek bailout provided by the rest of the Europe.

Trailing New Democracy was the hard-left Syriza coalition with 27.1%—up substantially from its count from last time. The center-left Pasok, which dominated Greek politics for a generation and won the 2009 elections, was slated to take a mere 12.3%. Pasok polled only slightly more votes than the combined tally for the Communists and the neo-Nazi Golden Dawn.

New Democracy leader Antonis Samaras has a better chance at forming a government than he did two months ago—if only because failure would mean repeating the protests and violence that seem to increase with each Greek election. Pasok leaders have been coy about joining a New Democracy government, but that may change if the alternative is another election or more chaos.

As for Syriza, it may be just as happy losing this round, figuring it can pick up the pieces if the center-right fails again. Its tub-thumping leader, 37-year-old Alexis Tsipras, has been the great beneficiary of Greek rage at an economic program, misleadingly dubbed "austerity," that has managed to avoid neither recession nor default.

But the apparent plurality vote for New Democracy also suggests that Greeks aren't eager to follow Mr. Tsipras off the socialist cliff, especially if it means daring the rest of Europe to stop writing bailout checks. Perhaps more Greeks are coming to understand that German Chancellor Angela Merkel might have preferred a Syriza victory as an excuse to cut Greece out of the euro zone. The Germans are beginning to conclude that Greece may be unreformable. A Syriza victory would have been seen as Greece pulling the plug on its own euro membership.

Mrs. Merkel will still face a difficult decision if Mr. Samaras forms a government and then seeks to renegotiate the bailout because he lacks the cash to fulfill its terms. Would the German Chancellor dare to say no, thus becoming the proximate cause of a first euro exit? That would be a terribly painful result for Greece, but as a lesson to the rest of Europe to shape up or suffer the same fate, it would have considerable utility. By itself, the high price of floating sovereign debt doesn't seem to be scaring straight either the Spanish or Italians.

The tragedy of Greece, and much of the rest of Europe, is that it overborrowed during the euro's first decade to finance a higher standard of living than it could afford. Now the debtors have to adjust.

The best way to do so is with supply-side reforms in taxes, pensions and labor markets that will lure investment and make Europe's economies more competitive. They need austerity for government but growth for the private economy. Without that, the Greek reprieve will be merely another opportunity lost.

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Europocalypse avoided, or just delayed?