When we briefly met Alexis Tsipras at the sidelines of a European Left gathering in Florence last November, the Syriza leader had a mischievous smile on his face. Visibly in his element, he told an assembled group of activists about his plans as Greece’s next Prime Minister: he would dare Madame Merkel to a “great game of chicken.” European creditors would be asked to forgive half the country’s officially-held debt — or face the consequences of a disorderly breakdown.

But this weekend, some three weeks ahead of snap elections, with Syriza leading the polls and Europe in panic, the Iron Chancellor appeared to call the leftists’ bluff. In what looks like a set of carefully orchestrated press reports, German officials announced that they no longer fear a Greek exit from the eurozone. Financial firewalls are in place and Portugal and Ireland — the other countries that received EU/IMF bailouts — have since recovered. A Grexit would be manageable by now.

The intention behind the well-timed remarks is clear: if Tsipras were to play hardball about a debt restructuring within the eurozone, the Germans would be more than happy to show Greece the door. At the same time, Germany clearly revealed its intention to boost the standing of its most important ally, sitting Prime Minister Antonis Samaras, whose only strategy in the electoral campaign so far has been to scare voters into believing that a Syriza victory would spell economic catastrophe.

The truth is that Syriza’s economic program is moderate and sensible while its leadership and advisers are fully committed to staying within the euro. Leading commentators, including most prominently Wolfgang Münchau of the Financial Times, have argued that “the radical left is right about the debt.” Syriza’s radical nature now resides purely in the fact that it demands reasonable treatment from unreasonable creditors. So why all the fuss about the threat of a Grexit?

Most of it is just fear mongering. But there is nevertheless an objective risk involved. Syriza has pledged to unilaterally halt the austerity measures demanded by foreign creditors, and there is a chance that the ECB might retaliate by cutting off its emergency liquidity assistance for the Greek banking system. In that case a Syriza-led government would be forced to come to the rescue of the banks by printing its own currency, thus forcing it — willy-nilly — out of the monetary union.

This weekend, Michael Fuchs, a senior member of Merkel’s Christian Democrats, seemed to make this threat explicit: “If Alexis Tsipras … thinks he can cut back the reform efforts and austerity measures, then the troika will have to cut back the credits for Greece. The times where we had to rescue Greece are over. There is no potential for political blackmail anymore. Greece is no longer of systemic importance for the euro.” But would Germany really allow the Troika to go that far?

It is difficult to tell — but a few things are certain. First, the Germans are probably bluffing just as much as Syriza is. Neither Tsipras nor Merkel is particularly keen on a Grexit, even though both are feeling the heat of critics (Tsipras from the Left Platform within Syriza and Merkel from the right-wing opposition party Alternatives for Germany) who are opposed to the Troika’s bailout programs and who advocate a breakup of the eurozone and a return to the drachma and the D-mark, respectively.

For the Greeks, the immediate consequences of exit would be very painful — even if the long-term prospects for economic recovery and a radical political project would be much greater outside the euro. For the Germans, too much has already been invested in keeping the euro together to allow it to fall apart at such a late stage. The spillover costs of Grexit may be manageable now, but the political dangers are simply too high. No one would want to set a precedent with Podemos waiting in the wings in Spain. Besides, German taxpayers would probably never see their money back in the event of a Grexit.

A second certainty is that Syriza’s economic plans depend entirely on German willingness to cancel a significant chunk of Greece’s debt. If the negotiations fail, Münchau rightly points out, the choice “would be either to revert to the status quo — in which case there would be no point in voting for Syriza — or leave the eurozone, and unilaterally default against foreign creditors.” Since Syriza rules out the latter, it will be completely dependent on German goodwill (or enlightened self-interest); if this does not materialize, austerity would prevail even under a Syriza government.

But there’s a third observation we need to make: in this era of casino capitalism, it doesn’t always matter what governments do or do not want. Often, what determines outcomes are the feverish sentiments of investors and the unpredictable movements of financial markets. The panicked pronouncements from Athens, Berlin and Brussels combined with the sensationalist media frenzy about an impending Grexit may just set in motion a self-fulfilling prophecy. A bank run in Greece upon the election of a Syriza government could possibly be the immediate trigger for that.

This, in turn, could unleash an investor stampede out of the periphery. No one wants to have their money stuck in a country whose currency may soon be massively devalued. The result would be a chain reaction of market panic with potentially catastrophic consequences. I personally do not think this is very likely, but there are smarter minds who do. Barry Eichengreen, who is not particularly prone to exaggeration, just warned that a Grexit would unleash a financial meltdown on the scale of “Lehman Brothers squared.” Merkel will clearly want to prevent this, even if that means acquiescing to Tsipras’ demands – to some extent.

For the moment, investors seem to be confident that the backstop of ECB financing — the European Central Bank still supports the Greek banking system and is widely expected to announce a bond buyback program on January 22, three days before the elections — will prevent financial implosion and further contagion by keeping Greek banks and other peripheral governments afloat on a raft of cheap credit. But this view may be too sanguine. While Merkel and the ECB would obviously want to prevent an implosion, they can hardly been seen looking the other way as Syriza rips up the bailout agreement. Soon everyone else would demand the same.

So where does this leave us in terms of plausible outcomes? The conflict over the debt may start off like a game of chicken but eventually it should be clear that Greece and Germany are tied at the hip and trapped in a classical Catch-22, with no perfect solutions available to anyone. The ideal outcome for Greece (Germany consenting to its main demands: a 50% debt cancellation and 60 years of cheap ECB financing) remains very improbable. The ideal outcome for Germany (a perpetuation of the status quo) is simply impossible. Sooner or later, something will have to give. But who will be the first to blink?

At this point, I believe the most likely outcome is for some kind of compromise to emerge out of the inevitable initial standoff. Both Tsipras and Merkel will begin by playing hardball, but eventually Tsipras will be forced to stand down as Merkel throws him a bone in the form of a partial Paris Club-style debt restructuring, while the ECB will tacitly keep buying Greek bonds and funding Greek banks in return for continued reforms. Meanwhile, Syriza will direct its arrows at the domestic oligarchs — breaking the grip of New Democracy’s cronies on the state — to create a slightly less monstrous form of “capitalism with a human face,” without overtly selling out.

Of course nothing is certain about this prognosis. As I outlined above, things may well turn out very differently. German intransigence may be stronger than expected, forcing Syriza to choose between the black-and-white options of austerity and exit. Syriza’s left-wing might then get its way and force through Plan B, reintroducing the drachma and repudiating the debt. Or market panic might take off before anyone else can even blink, forcing Greece to default and exit in disorderly fashion, triggering a catastrophic crisis and a collapse of the currency union. No one knows.

But if the above scenario of a Greek-German compromise bears out in practice, as is widely expected by radicals and activists in Greece itself, there will be only one place that the impulse for social transformation can still come from: from below. In that event, the most important moment (and the biggest challenge) for Greece’s vibrant grassroots movements — which mobilized with such impressive force in the first years of the crisis only to demobilize in anticipation of a left government after 2012 — may yet lie ahead. Whatever happens in 2015, it will prove to be an interesting year.

Jerome Roos is a PhD researcher in Political and Social Sciences at the European University Institute and founding editor of ROAR Magazine. Follow him on Twitter @JeromeRoos.