Tsipras Calls Early Greek Elections to Strengthen Grip on Power

Friday 21st August 2015

by Jonathan Stearns, Paul Tugwell and Marcus Bensasson

August 21, 2015

Greek Prime Minister Alexis Tsipras announced he will step down with an eye to snap elections, a move the embattled leader will likely use to shut out dissenters and return to power with a more manageable coalition.

“Now the Greek people need to have their say,” Tsipras said. “With your vote you will show who can lead Greece on the difficult but promising road ahead of us, and how. With your vote you will judge us all.”

After his televised speech, Tsipras emerged from his Athens office onto the sidewalk at about 8:50pm local time and walked next door and handed his resignation to the Greek president, Prokopis Pavlopoulos, asking him to set in motion procedures for a swift return to the ballots. A government official earlier said a vote could be held as soon as Sept. 20.

Though his eight months at the helm of Europe’s most indebted country was beset by turmoil and brought the economy on the brink of ruin, Tsipras used his broadcast to list his achievements, from clinching a new aid package to securing a commitment from euro-area partners to consider debt relief.

Market response to the announcement was muted. The Standard & Poor’s 500 Index remained down, falling 1.7 percent for the day. Greek bonds fell, sending yields on 10-year notes up 21 basis points to 9.56 percent.

The prospect of yet another vote, on the heels of a traumatic referendum that was followed by capital controls, introduces an element of uncertainty just as a bailout of 86 billion euros ($96 billion) was secured.

More Volatility?

Tsipras’s move “could elevate programme implementation concerns and, potentially, puts future official sector disbursements at risk,” Moody’s said after the announcement.

Among European leaders, the news was seen as positive. German Chancellor Angela Merkel told her Brazilian counterpart, Dilma Rousseff that “Tsipras stepping down is part of the solution, not part of the crisis,” Rousseff told reporters in Brasilia.

Elected in January on an anti-austerity platform, Tsipras has presided over a revolt in his Syriza party after pushing through the kind of tax increases and spending curbs that he had vociferously opposed while in opposition.

Party Purge

The vote will supply Tsipras with the chance to shed unhelpful members of his own party before Greece faces an October review of progress in meeting the rescue terms and the need for more disbursements of international aid. Under Greek law, if an election is held less than 18 months after the last election, party leaders determine who’s on electoral lists.

A prominent Syriza rebel, former Social Security Minister Dimitris Stratoulis, indicated that the party’s so-called Left Platform faction will break away to run for election under a separate banner. Greeks will get the chance to vote for an “anti-bailout front” at the ballot, he said in comments broadcast on Skai TV.

With the support of smaller pro-European Union parties such as To Potami and Pasok, the election winner “could create a strong coalition that will be able to pass and implement reforms,” said analysts at Axia Ventures Group Ltd led by Constantinos Zouzoulas.

Opposition Organizes

In the meantime, the biggest opposition parties will each have a chance over as many as three days to form a coalition -- a procedural formality under the Greek constitution that isn’t expected to prevent the snap elections from taking place. Evangelos Meimarakis, leader of the New Democracy party that’s the second biggest, said he would do every thing possible to form a government when invited to try to do so by the president as soon as Friday.

Whoever inherits the reins will have to deal with honoring commitments and shouldn’t hold out hope for a debt forgiveness.

“It is crucial that Greece maintains its commitments to the euro zone,” said Dutch Finance Minister Jeroen Dijsselbloem, who also heads the group of euro-area finance chiefs, in an e-mailed statement. “I hope the elections will lead to even more support in the new Greek parliament.”

The European Commission, which negotiated the terms of Greece’s third bailout alongside the European Central Bank and the International Monetary Fund, also responded positively to the prospect of a September ballot.

“Swift elections in Greece can be a way to broaden support for ESM stability support program,” Martin Selmayr, chief of staff to commission President Jean-Claude Juncker, said in a Twitter post.

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