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Brussels (AFP) - Whoever wins Greece's general election on Sunday, Europe will have to take urgent action to tackle the country's mountain of debt before it buries the rest of the eurozone, analysts say.
Alexis Tsipras, head of the far-left Syriza party that leads in the polls, has alarmed EU capitals by pledging to ditch austerity measures and renegotiate the debt left by two huge international bailouts.
The risk of Greece crashing out of the euro is unlikely irrespective of the result, analysts say, as Athens and Brussels would probably strike a deal despite the fiery rhetoric on both sides.
But even if Tsipras loses, the European Union must deal with an unsustainable debt level that stands at 177.7 percent of Greece's economic output in order to restore confidence in the struggling eurozone, they say.
The once off-limits idea of reducing Greece's debt is now quietly gaining ground.
"Instead of denying this reality the EU finance ministers should start facing it. They should begin to think about how they can ease the debt burden of Greece," said Paul De Grauwe of the London School of Economics.
- Debt deal likely -
In 2012 the euro nearly imploded over fears that Tsipras could come to power, and he only narrowly lost snap elections to current right-of-centre Prime Minister Antonis Samaras.
Samaras now seems headed for defeat, punished for the crushing austerity that was the cost of securing 240 billion euros ($285 billion) in bailouts from the EU and International Monetary Fund.
Greece has as a result lost about a quarter of its Gross Domestic Product in less than five years, only breaking out of six years of recession in the second quarter of 2014.
Despite the EU's official stance that it is a matter for Greek voters, Brussels and Berlin have been quick to give veiled warnings about the dire consequences of a Tsipras win this time around.
German newspapers have reported that Berlin has made preparations for Greece leaving the euro, while European Commission President Jean-Claude Juncker warned Greeks against the "wrong election result".
Many analysts however believe that the responsibility of running Greece would soften Tsipras.
The situation will be urgent with a two-month extension from Greece's creditors -- granted to conclude an audit that will determine the release of some seven billion in loans -- due to expire on February 28.
The most likely scenario if Syriza wins "is a relatively constructive negotiation with the Troika which leads to an agreement" on the debt, said Erik Nielsen, chief economist at Unicredit Bank in London.
Tsipras has indeed sounded more moderate during the run-up to the vote in his tone towards the Troika -- the EU, European Central Bank and IMF team that oversees the Athens rescue.
- Devil in the detail -
But while a debt agreement is on the cards, the devil is in the detail.
"There isn't much room for manoeuvre," a European diplomatic source said.
The debt held by the US-based IMF, about 24 billion euros of Greece's total 317 billion, is widely considered untouchable, even by Syriza.
This leaves the remaining 270 billion euros held by public actors, primarily the EU, the ECB and by bilateral holdings of individual member states.
Simply wiping out the debt at the levels Tsipras wants would be politically impossible.
"We will remain tough. It is clear that we would say a resounding no to forgiving the loans," Finnish Prime minister Alex Stubb told the Financial Times last week.
The only option left is tinkering. Greece's creditors can extend maturities, and reduce interest rates, helping to reduce the debt load, but only a marginal and possibly ineffective level.
Christian Noyer, the head of France's Central Bank who sits on the ECB's governing board, believes discussion on extending repayment on Greece's debt is "appropriate".
The influential think-tank Bruegel said reducing interest rates on the debt could be the key and adds the idea was already broached by eurozone ministers in November 2012.