Alexis Tsipras, head of Greece's radical left party, said in an interview with the Journal that there is little chance Europe will cut off funding to the country and if it does, Greece will repudiate its debts. WSJ's Alkman Granitsas discusses his interview with the Syriza leader. Photo: Getty Images
ATHENS—The head of Greece's radical left party—throwing down a gauntlet that could increase tensions between Greece and its frustrated European creditors—said he sees little chance Europe will cut off funding to the country but that if it does, Athens will stop paying its debts.
European Pressphoto Agency
Coalition of the Radical Left (Syriza) party leader Alexis Tsipras
A financial collapse in Greece would drag down the rest of the euro zone, said Alexis Tsipras, the 37-year-old head of the Coalition of the Radical Left, known as Syriza, and potentially the country's next prime minister. Instead, he said, Europe must consider a more growth-oriented policy to arrest Greece's spiraling recession and address what he called a growing "humanitarian crisis" facing the country.
"Our first choice is to convince our European partners that, in their own interest, financing must not be stopped," Mr. Tsipras said in an interview with The Wall Street Journal. He said Greece doesn't intend to take any unilateral action, "but if they proceed with unilateral action on their side, in other words they cut off our funding, then we will be forced to stop paying our creditors, to go to a suspension in payments to our creditors."
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According to recent opinion polls, Mr. Tsipras's party is poised to win the most votes in elections next month, bettering its surprise second-place finish in an inconclusive May 6 vote that left no party or coalition with enough seats in Parliament to form a government. With Mr. Tsipras likely to win pole position in the coming vote, it raises the risk that Greece will soon face a showdown with European creditors over the contentious austerity program that Athens must adhere to in order to receive fresh aid.
Mr. Tsipras's remarks come as Greece's failure to form a coalition government has fueled euro-zone tensions and spurred talk of a potential Greek exit from the common currency. This week, Greek citizens, anxious over the possibility their euros could be redenominated into a weaker new drachma, withdrew hundreds of millions of euros from local banks. On Thursday, Fitch Ratings downgraded its ratings on Greece two notches further into junk territory, pointing to the increased risk that Greece may leave the euro zone.
In Spain, another vulnerable euro-zone economy, the government Thursday sought to quell fears sparked by an unconfirmed report of massive withdrawals from Bankia SA, an ailing lender that Spain rescued last week. "It's not true that there's a deposit flight," Deputy Finance Minister Fernando Jiménez Latorre said.
Worries that the turmoil surrounding Greece could lead to contagion sent the euro to its lowest level against the dollar since mid-January, extending its decline over the past three weeks to 4%. Demand for the perceived safety of U.S. Treasurys pushed the yield on the benchmark 10-year bond to 1.702%, the lowest closing level in its history.
In Greece, a caretaker government was sworn in Thursday at the presidential palace, putting in place a technocratic cabinet led by senior judge Panagiotis Pikrammenos as prime minister that will take the country to fresh elections.
In the past few weeks, European leaders—from the Continent's central bankers to Germany's chancellor—have made clear that the reform program is a quid pro quo for receiving further payouts from Greece's latest €173 billion ($220 billion) aid package, without which Greece won't have enough money to pay for basic services like schools and hospitals.
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Key Players in the Debt Crisis
The high-stakes confrontation could determine within weeks whether Greece is cut off from international rescue loans and forced to print its own currency, or whether Europe blinks and lets Greece run bigger fiscal deficits longer, to prevent financial panic from spilling over to other indebted euro-zone nations, such as Portugal and Spain. Leaders of the Group of Eight leading nations meeting this weekend are expected to pressure German Chancellor Angela Merkel to be more active in extending funds to resolve Europe's crisis—an effort she is likely to resist.
Mr. Tsipras said in the interview that, if push comes to shove, Greece can manage on its own. By not paying its debts, the country would have enough cash to pay its workers and retirees, he said. He also proposes cuts in defense spending, cracking down on waste and corruption, and tackling tax evasion by the rich.
"Whatever we do, things will be difficult. But it will also be difficult at the same time for all of Europe because the euro will collapse" if Greece's funding is cut off, said Mr. Tsipras. Both sides should step back "before we reach that point," he said, and find a "European solution."
Despite the game of chicken that Mr. Tsipras appears to be playing with Greece's European creditors, he said the country should remain in the euro zone.
"Our national currency is the euro, so it is not that easy to cut the link. Exit from the euro would have multiple negative consequences," Mr. Tsipras said. "It is not something we desire, it is not something we are seeking."
Greece's economy, now in a fifth year of recession, is officially expected to shrink a further 4.7% this year—some private economists say the contraction could be more than 7%—while unemployment is close to record highs and more than half of all young people are out of work.
Mr. Tsipras, an engineer by training, recommends a stimulus package to boost the Greek economy and has called for tearing up the country's existing austerity-for-loans program. He has suggested scrapping plans to lay off 150,000 public-sector workers by 2015, and repealing recent measures to push down private-sector wages. He favors nationalizing the banking system so as to better direct lending policies, and speaks favorably of Franklin Delano Roosevelt's Depression-era New Deal program and President Barack Obama's stimulus package—something Mr. Tsipras said is lacking in Europe.
Recent opinion polls show Mr. Tsipras's message has gained traction with a crisis-weary Greek public that blames two establishment parties—the conservative New Democracy and Socialist Pasok party—for leading the country into crisis.
Support for Syriza is growing, a poll published Thursday showed. Syriza would receive 22% of the vote if elections were held today, more than five percentage points higher than its May 6 result, according to a survey by the Pulse polling agency published in To Pontiki weekly newspaper. Support for the two mainstream parties continues to languish, with New Democracy polling 19.5% and Pasok 13.2%—little changed from their showing in this month's vote.
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THE KING OF STAMFORD BRIDGE !!!
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