Syriza's victory in the Greek elections was a heady moment in the history of Greece but has become a headache for the more disciplined economies in the eurozone, notably Germany.

Alexis Tsipras
Alexis Tsipras promises to end his country's 'humiliation' at the hands of foreign bankersReuters/Alkis Konstantinidis

The choice that faces Greece's creditors is stark. Germany, the main supplier of bailout funds and the effective paymaster of Europe, can decide to make special allowances for Greece to keep it in the eurozone – but if it does, what is to prevent other hard-pressed countries in southern Europe asking similar favours?

Or, it can call Syriza's – and Greece's – bluff, and tell them to face reality. And reality means that if the country refuses to abide by its existing bailout terms it will cease receiving European Central Bank funds, will default on its debt, and such a default is incompatible with membership of the euro.

Either way the European Union, and the eurozone, are set for a prolonged period of instability, with other struggling economies looking to see whether they too might find a way out of the austerity economics forced on them by the European Central Bank.

The mass demonstration on Saturday (31 January) in Spain by anti-austerity party Podemos shows a tide is running across Europe.

But Germany needs to make a calculation about whether their aim to ensure the continuance and strengthening of the eurozone, and therefore of the European Union, would be furthered or retarded by allowing Greece to default and go back to the drachma.

It is a difficult call but the likely effect on a Greece suddenly denied bailout funds could be sufficiently dreadful to deter other nations from trying to follow them. It seems, at the moment, more unlikely that the Germans will cave in and allow Greece to observe a different level of economic rectitude than anyone else.

A plummeting drachma, rampant interest rates and Weimar-style inflation might only be the start to the problem, and no one could predict how long it might be before the situation rights itself.

Alexis Tsipras, the Syriza leader, promises to end his country's "humiliation" at the hands of foreign bankers. He claims he doesn't want to take unilateral action – yet at the end of last week the Dutch finance minister found the willingness of his Syriza counterpart to co-operate so non-existent that he walked out of the meeting they were holding. So Tsipras's idea of concerted action is everyone agreeing with him, rather than vice versa.

He promised to increase the minimum wage and state pensions. On top of finding the money to do that, Greece needs €10bn to pay the next instalment on its debts – something it can't do without a continued flow of money from the bailout fund. But that money is available only if Greece sticks to the conditions of austerity imposed by the European Central Bank – conditions largely shaped by the Germans.

Angela Merkel EU
'Germany has made such a financial and moral investment in the EU that it will wish to do all it can to preserve it'REUTERS/Francois Lenoir

The Germans will be aware that if they make allowances for Greece, by allowing the country to alter its bailout terms, other countries will want similar favours. If granted, these could fatally wound the eurozone and undermine the whole European project.

But forcing Greece to default would shake the euro, and the European banking system, with banks in several eurozone countries having a heavy exposure to Greece.

The Germans have gone to extraordinary lengths to accommodate Greece already, for fear that its exit from the euro would be the beginning of the end of the whole project.

However, Germany still might reckon the realities of a post-euro Greece, with economic chaos taking over as the country reverted to its own, largely worthless, currency, would deter any other austerity-hit country from choosing the exit option too.

Whatever happens, the eurozone economy is likely to weaken. The large-scale writing off of debt would seriously deter further investment, restricting growth and the ability to service existing debt. A Greek exit, though, would cause other countries to think that they, too, could leave. The danger for the European project is that such a course would not be restricted to small countries.

Spain and Italy could both have general elections this year, and Italy too has a popular party – the Five Star movement – determined to end austerity. And leading the opinion polls in France is Marine Le Pen of the National Front, a party pledged to restore the franc and reclaim French economic sovereignty. The Italian and French economies are between 10 and 11 times the size of Greece's. Not only could the eurozone not survive the exit of either country, neither, in all probability, could the European Union.

Germany has made such a financial and moral investment in the EU that it will wish to do all it can preserve it. However, the 19 countries of the eurozone are all democracies, and popular feeling cannot be ignored when framing economic policy – Syriza has shown that.

Greece and the ECB are now in a game of bluff. But irrespective of who blinks first, the reality that one size in the eurozone does not, and cannot, fit all is now being tested to destruction.

It must now be clearer than ever that a single currency cannot work without a single economic policy – one that settles matters such as tax rates and social security benefits centrally, and without consulting the electorates of the individual nations concerned.

And what Syriza may have shown is that to ignore the will of the people in such a way is a step too far for so diverse a collection of nations and economies as the EU to be able to take. Whether Greece stays or leaves, the eurozone will never be the same again.

Dr Simon Heffer is a British commentator and author who has written columns for The Daily Mail, The Daily Telegraph, The Spectator and The New Statesman. He is the biographer of Enoch Powell, Thomas Carlyle and Ralph Vaughan Williams and recently published High Minds: The Victorians And The Birth Of Modern Britain.