Greek Prime Minister Alexis Tsipras resigned last night, firing the starting gun on the second general election of 2015.
He’s heading back into the election as a candidate who’s undoubtedly far to the left of most of the rest of the eurozone’s leaders.
But he’s no longer anything like as radical a figure. What he’s proposing now is a simply fairer sort of bailout deal than the previous two, with far fewer of the grand goals he had before the January election.
And he’s not taking his whole movement with him. On Friday morning 25 MPs, largely from the “Left Platform” of the party split from Syriza, forming an independent group called Popular Unity.
Former energy minister Panagiotis Lafazanis will lead the grouping.
Having been catapulted to power after years of oppositions to Greece’s bailouts — which come paired with austerity and structural reform packages — the remaining members of Syriza now find themselves tasked with implementing one.
It still looks quite likely that Tsipras will be Prime Minister in two months. Syriza remains popular in comparison to the alternatives. After getting 27.8% of the vote in the January election, the centre-right New Democracy party now regularly polls below 20%.
It’s possible that Tsipras will have to form a new and different coalition, but seems that there will be no alternative bloc in parliament to build a majority around. It’s not clear how much support Popular Unity might sap from Syriza.
Here’s HSBC’s Fabio Balboni in a note sent out late on Thursday, explaining the risks from the election:
It also remains to be seen with which programme Mr Tsipras will run the electoral campaign, whether he will stick to the letter of the MoU (Memorandum of Understanding, the bailout agreement), or revert to some of his previous promises, particularly on critical elements such as the labour market and pension reform. With many elements of the programme still to be resolved and a tight timeline, as we flagged in yesterday’s report, this could cause delays and uncertainty on the future of the programme. The discussions in the Dutch and German parliaments yesterday show that the level of tolerance for possible slippages is minimal, and fears of a possible Grexit could also resurface.
That’s the main risk — that the election in some way derails the deal as it exists now. But if Tsipras really wanted to do that, it’s hard to see why he would have submitted to the deal in the first place.
In fact, if he can form a government with some of the centrist and centre-left parties in the Greek parliament — perhaps To Potami or Pasok, the implementation of the bailout deal might actually be more secure than it would be while he’s relying on the support of the Left Platform.
Europe has won this round. Tsipras was always faced with an agonising choice between two compelling forces. On the one hand, his own principles, his party’s left flank, and his anti-austerity mandate had pulled him away from reaching a business-as-usual bailout deal with Greece’s creditors.
On the other hand, the Greek people have displayed a constant wish to remain in the eurozone, despite the severe economic depression they have seen in the last five years. In the end, this desire won out.
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