As noted earlier, Greece might be looking at an early election within a month or so, an election that could see the radical leftists of Syriza come to power, radical leftists who will want to tear up the current austerity program.

Writing for the Daily Telegraph , Ambrose Evans-Pritchard surveys the situation. He clearly believes that if there is a general election, Syriza is in with a very good chance. He (like me) also thinks that, in attempting to cut a better deal for Greece after any election victory, Syriza will be given far more leeway by Greece’s euro zone ‘partners’ than current rhetoric would suggest.

[Syriza leader] Mr Tsipras….is gambling that EU leaders – meaning Germany’s Angela Merkel and Wolfgang Schauble – will yield. His calculation is that they will not dare to blow up monetary union at this late stage, and over a relative pittance. Too much political capital has been invested. The EU-IMF loans have already reached €245bn, the biggest indenture package in history.

I think that’s right. Greece will not be the crisis…

But then Evans-Pritchard shifts from predicting what may happen to an examination of where things stand now. It doesn’t make pretty reading:

The EU’s mishandling of Greece has been calamitous. Investment has fallen by 63.5pc. Public debt has spiralled to 177pc of GDP, even after two sets of haircuts on private creditors. Unemployment has dropped slightly to 25.9pc, or 49.3pc for youth, but only because of a mass exodus, a brain-drain to the US, Canada, Australia, Germany, and the UK. The work force has shed over a million jobs, dropping to 3.5m. The economy has stabilized. It grew 0.7pc in the third quarter on pent-up demand. But this should not be confused with recovery or a return to viability within the EMU fixed-exchange system. Exports were lower in 2013 (€51.6) than in 2007 (€56.6bn). The current account deficit has narrowed because imports have collapsed. For all the talk of EU-led reform, Greece’s ranking on the World Economic Forum’s competitiveness index has dropped from 67 to 81 over the last six years, below Ukraine, Guatemala, and Algeria.
… My view is that Greece would have recovered long ago if it had left EMU at the outset of the crisis, turning to the IMF for a classic bail-out package. It received the IMF’s austerity medicine, but not IMF’s the cure of debt forgiveness and devaluation. The fiscal multiplier did its worst with nothing to offset it.
…Greece was sacrificed to buy time for the [euro zone] alliance, like the Spartans at Thermopylae. It was subjected to an unworkable economic experiment, in defiance of known economic science and principles. Given what has happened, Europe’s leaders have a special duty of care to Greece. They have betrayed it.

Evans-Pritchard omits to discuss the extent to which Greece dug its own grave. Dysfunctional and corrupt, it signed up for a currency for which it would never be suited, helped by, well, interesting numbers games and (most unforgivably of all) the connivance of the rest of the euro zone in the pretense that Greece was ready for membership. Once admitted into the currency union, it saw the euro (and the low interest rates that came with it) as a free lunch rather than an incentive for structural reform.

That said, the euro zone has to deal with its economic situation as it is, not as it should be:

Europe’s contractionary policies have failed on every level. The region has not regained “escape velocity” since the Lehman crisis, and is now sliding into deflation. Output is still below 2008 levels and has performed worse over the last six years than from 1929 to 1935. Debt ratios are rising across the South….

This is not a story that will end in Greece.