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Greek Election Poses New Economic Risks Greek Election Poses New Economic Risks
(about 9 hours later)
The upcoming Greek election may reopen the can of worms that the 86 billion euro bailout deal with creditors was supposed to close. Given that no party is likely to emerge from the Sept. 20 vote with a majority, it may be hard to form a strong government that can implement the program. There’s even a risk that there will be yet more elections, tipping Greece back into crisis. The upcoming Greek election may reopen the can of worms that the 86-billion-euro bailout deal with creditors was supposed to close. Given that no party is likely to emerge from the Sept. 20 vote with a majority, it may be hard to form a strong government that can implement the program. There’s even a risk that there will be yet more elections, tipping Greece back into crisis.
When Alexis Tsipras set the election in motion by resigning as prime minister, he probably thought he would win fairly easily. After all, opinion polls in July showed him head and shoulders above his opponents. Mr. Tsipras’s idea was to get rid of the members of Parliament in his left-wing Syriza party who opposed his deal with the eurozone and secure a new mandate to carry out the program, worth the equivalent of $96 billion.When Alexis Tsipras set the election in motion by resigning as prime minister, he probably thought he would win fairly easily. After all, opinion polls in July showed him head and shoulders above his opponents. Mr. Tsipras’s idea was to get rid of the members of Parliament in his left-wing Syriza party who opposed his deal with the eurozone and secure a new mandate to carry out the program, worth the equivalent of $96 billion.
But opinion polls that came out last week paint a different picture. In all, Syriza is the leading party, but its gap over the center-right New Democracy party has narrowed sharply.But opinion polls that came out last week paint a different picture. In all, Syriza is the leading party, but its gap over the center-right New Democracy party has narrowed sharply.
What’s more, Mr. Tsipras’s approval rating, which used to be sky-high, has come down to earth. In a poll by the University of Macedonia, only 30 percent of those asked had a positive view of him, down from 70 percent in March.What’s more, Mr. Tsipras’s approval rating, which used to be sky-high, has come down to earth. In a poll by the University of Macedonia, only 30 percent of those asked had a positive view of him, down from 70 percent in March.
In the past, Mr. Tsipras seemed like the Teflon prime minister, who remained popular despite terrible decisions that took the country to the edge of an economic abyss. But it looks as if the mud is beginning to stick.In the past, Mr. Tsipras seemed like the Teflon prime minister, who remained popular despite terrible decisions that took the country to the edge of an economic abyss. But it looks as if the mud is beginning to stick.
The civil war inside Syriza is also taking its toll. One hard-left faction, which wants to bring back the drachma and is furious that Mr. Tsipras agreed on a deal with the eurozone despite previously saying he wouldn’t, has already created a new party.The civil war inside Syriza is also taking its toll. One hard-left faction, which wants to bring back the drachma and is furious that Mr. Tsipras agreed on a deal with the eurozone despite previously saying he wouldn’t, has already created a new party.
The election campaign has barely started, and opinion polls during the August holiday season are not considered particularly reliable. Despite those caveats, it doesn’t look likely that any party will emerge with a majority in the 300-seat Parliament even after taking account of the fact that the one with the most votes gets an extra 50 seats.The election campaign has barely started, and opinion polls during the August holiday season are not considered particularly reliable. Despite those caveats, it doesn’t look likely that any party will emerge with a majority in the 300-seat Parliament even after taking account of the fact that the one with the most votes gets an extra 50 seats.
This presents a problem. True, the vast majority of the members of Parliament elected next month are likely to belong to parties that are committed at least in theory to the bailout. The snag is that Mr. Tsipras has said he won’t be prime minister of a government including New Democracy or two smaller centrist and center-left parties. What’s more, it is touch-and-go whether his favorite coalition partner, the far-right Independent Greeks, will secure any seats at all.This presents a problem. True, the vast majority of the members of Parliament elected next month are likely to belong to parties that are committed at least in theory to the bailout. The snag is that Mr. Tsipras has said he won’t be prime minister of a government including New Democracy or two smaller centrist and center-left parties. What’s more, it is touch-and-go whether his favorite coalition partner, the far-right Independent Greeks, will secure any seats at all.
If Mr. Tsipras can’t form a government, there may have to be yet another election, which would be the third this year. This could cause further economic mayhem because Athens would fall seriously behind in implementing its bailout deal. People might speculate again that Greece could leave the euro.If Mr. Tsipras can’t form a government, there may have to be yet another election, which would be the third this year. This could cause further economic mayhem because Athens would fall seriously behind in implementing its bailout deal. People might speculate again that Greece could leave the euro.
The Greek people might well punish Mr. Tsipras if he forced a third election. They already seem unhappy that a second ballot has been called — not to mention the referendum on an earlier version of the bailout program that Mr. Tsipras held in July.The Greek people might well punish Mr. Tsipras if he forced a third election. They already seem unhappy that a second ballot has been called — not to mention the referendum on an earlier version of the bailout program that Mr. Tsipras held in July.
Given that, Mr. Tsipras might yet form a coalition with the center and center-left parties he has pledged not to deal with.Given that, Mr. Tsipras might yet form a coalition with the center and center-left parties he has pledged not to deal with.
He does, after all, have a track record of going back on his word.He does, after all, have a track record of going back on his word.
Such an outcome might lead to an effective execution of the bailout. But there is a risk that Mr. Tsipras will not dump all the rebels from his party because he is afraid of swelling the ranks of the splinter group.
In that case, he could find that his government starts with a majority, but that its unity melts away when it has to make tough decisions, again leading to elections. This situation might be avoided if any party invited to join a Tsipras-led coalition insists on all the other centrist parties being in the government, too. That would probably give it a big enough majority to withstand future defections.
Any putative coalition partner should also insist that Mr. Tsipras appoint skilled ministers, including some technocrats, to his cabinet. His first government was plagued with incompetence.
Another idea is that Mr. Tsipras could support some form of national unity government, but not as its prime minister. He could propose another Syriza politician or some technocrat for the post. But this would raise the concern that Mr. Tsipras wanted to wash his hands of the program he had previously signed up to, which in turn would make it harder to implement.
All these calculations will, of course, change if New Democracy wins the election. New Democracy would find it easier to form a coalition because it has promised to work with any democratic party after the vote. It has even said that it would work with Syriza in what would be a national unity government. While that, indeed, might be the best outcome for Greece, Mr. Tsipras is unlikely to agree to it.
Even if the worst situations are avoided, the risk is that amid the political fighting, what is most beneficial for the Greek people does not end up driving events forward.