Greek Prime Minister Alexis Tsipras is playing a very dangerous political game. His decision to resign Thursday night and call for snap elections has largely been viewed as a shrewd political move, as it would allow him to supposedly consolidate his power and establish a fresh mandate before the government begins to implement the terms of its third bailout agreement. While it is possible that Tsipras is able to attain those goals, it is just as likely that something extraordinary will happen, which, at best, would be disruptive to the Greek economy or, at worst, cause another economic panic.
Frustrated with years of government ineptitude and economic misery, the Greek people voted in, by a small majority, Tsipras’s new and totally untested Syriza party last January. They did so because Syriza promised it would cancel much of the disastrous austerity measures, which, over the last five years, have caused the Greek economy to shrink by over 25%. Syriza said it would renegotiate the terms of the past bailouts with Greece’s European partners so that the country could focus on growth initiatives instead of paying down an ever-increasing mountain of debt.
But Syriza managed to accomplish none of those things; indeed, it arguably made things worse. The terms of the last bailout, which Tsipras negotiated this summer, not only solidify Greece’s adherence to all the previous austerity provisions he promised to overturn, but they pile on a lot more, dashing any hope of Greece being able to economically grow its way out of its debt crisis. Indeed, Tsipras called a national referendum on whether or not to implement the terms of the new bailout, of which a majority of Greek voters, 61%, voted “OXI!” or “NO!”.
Despite the overwhelming majority against the bailout, Tsipras chose to ignore the results of the referendum (the one he called) and voted to approve the bailout anyway.
That Tsipras believes he stands a chance at reelection after such a disastrous eight months in power may seem strange to outside observers, but this is Greece, where, apparently, anything can happen. This is, of course, one of the country’s biggest problems—it’s super unstable. Consider that in the January vote nearly half of the 300 Members of Parliament were elected for the first time. That could very well happen again—with a whole new crop of M.P.s bent on “shaking up” the system.
Indeed, just Friday, a quarter of Tsipras’s party announced they were breaking away from Syriza and forming a new far left party. Led by Panagiotis Lafazanis, the former energy minister and leader of the Left Platform faction in Syriza, the new Popular Unity party is said to advocate for leaving the euro and walking away from all the bailout deals. More defections could be forthcoming as support slips away from Tsipras. As of now, Popular Unity has attracted enough lawmakers to make it the third-largest party in the country, behind Syriza and the conservative New Democracy party.
To complicate matters even more, per Greece’s constitution, Evangelos Meimarakis, the head of New Democracy, has three days in which he can try and form a coalition with conservative M.P.s, potentially saving Greece from another round of elections next month. Europe hopes some of Syriza’s members defect to the right (as they have tended to be pro-bailout), as that could give New Democracy the votes it needs to cobble up a majority and take power. This probably won’t happen given how much animosity there is between Syriza and New Democracy, but 118 members of the ruling coalition, dominated by Syriza, did vote alongside their more conservative M.P.s in passing the new bailout agreement. Some of those fresh-faced liberals that the country elected in January may have been conservatives in disguise all this time. We’ll just have to wait and see what happens there.
This week Fitch Ratings upgraded Greek debt to “CC,” from “CCC” after it was clear Germany would approve the third bailout agreement. But Greek debt continued to sell off this week despite the upgrade, thanks to all this talk of new elections. The market is afraid of whoever might come to power and with good reason. The people voted just a couple months ago to reject the bailout agreement by an overwhelming majority. Why would they, just three months later, vote for the same people who’ve chosen to disregard the referendum and back the new bailout? I will spare you the parting reference to all this being a “Greek drama” or whatever, but these elections will surely be placing Greece, at least for the next month, back to center stage.