International_Europe_Greece

Greek Prime Minister Alexis Tsipras resigned Thursday and called early elections, an attempt to get a new, stronger mandate to implement a three-year bailout program that sparked a rebellion within his radical left party.

In a televised address to the nation, Tsipras said his government had gotten the best deal possible for the country when it agreed to an 86 billion euro ($95 billion) bailout from other eurozone countries.

The rescue was all that kept Greece from a disastrous exit from the euro but came with strict terms to cut spending and raise taxes — the very measures Tsipras had pledged to fight when he won elections in January.

His U-turn in accepting the demands by the country’s creditors led to outrage among hardliners in his Syriza party, with dozens voting against him during the bailout’s ratification in parliament last week, which was approved thanks to support from opposition parties.

Tsipras has insisted that although he disagrees with the conditions of the bailout terms, he had no choice but to accept and implement them to keep Greece in the euro, which the vast majority of Greeks want.

With the country’s finances now secured, Tsipras said he felt obliged to let the Greek people evaluate his work.

“Now that this difficult cycle has ended … I feel the deep moral and political obligation to set before your judgment everything I have done, both right and wrong, the achievements and the omissions,” he said in the address. “The popular mandate I received on January 25 has exhausted its limits.”

Tsipras formally submitted his resignation to the country’s president, Prokopis Pavlopoulos to begin the election process. This will involve letting the two main opposition parties — the conservative New Democracy and the Nazi-inspired Golden Dawn — try to form a government. Each party can spend up to three days trying to do so, and New Democracy leader Evangelos Meimarakis said he will use his available time. Neither party, however, is expected to have the support in parliament to be able to form a government.

Tsipras did not mention a date for the election, although it will have to be held within the next month, with government officials saying Sept. 20 is the likeliest date.

The European Union’s executive Commission said it “takes note” of the election announcement. “Broad support for (bailout deal) and sticking to commitments will be key for success,” spokeswoman Annika Breidthardt said in a tweet.

Tsipras had delayed a decision on whether to call new elections until after Greece received the first installment from the bailout and made a debt repayment to the European Central Bank, both of which it did Thursday.

Despite his policy U-turn, Tsipras continues to enjoy popular support and was far ahead of his opposition rivals in opinion polls, although none have been published since the bailout agreement was finalized.

Tsipras will also be calculating that he might get a better election result if polls are held before voters feel the impact of the steep tax hikes and spending cuts demanded by the bailout program.

In his Thursday night address, he acknowledged the bailout deal was not what his anti-austerity government had wanted.

“I wish to be fully frank with you. We did not achieve the agreement that we were hoping for before the January elections,” he said. “But … (the agreement we have) was the best anyone could have achieved. We are obliged to observe this agreement, but at the same time we will do our utmost to minimize its negative consequences. Our target will be to regain our sovereignty from our creditors as soon as possible.”

If Tsipras wins the elections, a new mandate will allow him to move away from the hardliners in his party, some of whom have openly advocated leaving the euro and returning to the drachma. The hardliners, including prominent members such as former energy minister Panagiotis Lafazanis and possibly the flamboyant former finance minister, Yanis Varoufakis, are likely to split from Syriza.

Some analysts took the reports of early elections as an indication that Greece will struggle to implement the terms of its bailout.

“Given its anti-austerity roots, the remaining Syriza party will still struggle to implement the demanding bailout conditions, especially in the likely event that Greece sinks further into recession,” said Jennifer McKeown, senior European economist at Capital Economics. “And major reforms seem unlikely to be passed in the period running up to the election.”

However, initial reaction from European authorities appeared cautiously optimistic. Martin Selmayr, head of the cabinet of European Commission President Jean-Claude Juncker, tweeted that quick elections “can be a way to broaden support for (the bailout) stability support program.”

The political uncertainty took its toll on the market, with the Athens Stock Exchange closing 3.5% on election speculation.

“For the stock markets it is a factor of uncertainty,” said analyst Evangelos Sioutis, head of equities at Guardian Trust Securities.

Greek banking is still restricted under capital controls imposed in late June to stem a bank run sparked after Tsipras called a referendum on creditor proposals for reforms following a breakdown in bailout negotiations. There are weekly limits on cash withdrawals and Greeks can only transfer up to 500 euros abroad per month. Companies have faced problems paying suppliers abroad, with all international payments requiring a laborious process of approval by a special finance ministry committee.

“Greece has capital controls, the economy is choking, and we will now have uncertainty from elections, so you understand that it has been a difficult month,” Sioutis said.

Originally published on Advisor.ca

Add a comment

You must be logged in to comment.

Register on Advisor.ca