Report

With Resignation, Greek Prime Minister Alexis Tsipras Calls a Referendum on Himself

Greek Prime Minister Alexis Tsipras resigned Thursday, triggering a new national election. That vote will be a referendum on his leadership as he accepted austerity in exchange for a European bailout.

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Abandoned by the most radical members of his far-left Syriza party, Greek Prime Minister Alexis Tsipras resigned Thursday and called for new national elections even as Athens accepted the first tranche of cash from a third European bailout that he helped deliver. The upcoming vote amounts to a referendum on his leadership, and the political maneuvering he employed, to force Greece to accept unwanted austerity in exchange for the bailout money the country desperately needs to stay solvent.

It now rests on anti-austerity lawmakers like former Greek Finance Minister Yanis Varoufakis to call Tsipras’s bluff. The revolt has been brewing for months, with more and more Syriza members rejecting bailout terms. It came full circle this week, when Germany and other European nations approved a third bailout of 86 billion euros. Lawmakers opposed to the plan hinted throughout the week that Tsipras would face a no-confidence vote that would lead to a new election. By resigning and calling for a new vote, the prime minister beat his rivals to the punch.

“The political mandate of the Jan. 25 elections has exhausted its limits, and now the Greek people have to have their say,” Tsipras said in a televised address Thursday, referring to the January 2015 election that allowed him to rise to power.

The new bailout’s first disbursement of 13 billion euros arrived in Athens on Thursday. Greece promptly used that money to pay the European Central Bank a 3.2 billion euro payment it owed. The ECB, along with the IMF, the European Commission, and the emergency loan-making European Stability Mechanism, are Athens’s creditors.

Now, Greece will be trapped in a month of political instability until the vote, which is tentatively pegged for Sept. 20; it will be the fifth national election in Greece since 2012. Tsipras is betting the Greek people will back his leadership during the crisis and elect a government that supports him. But if he falls short, and the number of anti-austerity opponents increases, it could put the three-year bailout at risk.

That’s because the IMF has said it won’t give money to the bailout until Greece starts enacting tax increases, spending cuts, and pension reforms as promised. IMF chief Christine Lagarde says Athens’s debt is not sustainable and refuses to increase the amount Greece will eventually have to pay back. Without the IMF’s participation, Germany — the largest contributor to the bailout — has said it would not continue to participate in the relief package. The IMF is set to review Greece’s progress in October.

“It’s going to be a tug of war,” Douglas Elliott, a global finance expert at the Brookings Institution, told Foreign Policy. “Greece wants to postpone some of the things they promised. Europe is going to try to keep them on the austerity path.”

Opinions differ on whether Greece will stay the course. Moody’s, the bond ratings agency, warned new elections “could elevate program implementation concerns and, potentially, puts future official sector disbursements at risk.”

The Economist‘s Intelligence Unit also cast doubt on a new government’s ability to implement the austerity plan.

“The mind-boggling scope of the reforms in the new agreement, which extend into virtually every area of the economy and polity, exceed anything visited upon even the post-Communist states of eastern Europe,” it said in a recent research note.

Others, including Elliott, think Tsipras’s move is a smart one.

“Personally, he’s still quite popular,” Elliott said. “He’ll lose some defectors from Syriza, but it’s still highly likely Syriza will be the single largest party in Greek parliament. That would put him in a commanding position to form a pro-bailout coalition.”

Ian Lesser, director of the German Marshall Fund’s Transatlantic Center in Brussels, said Tsipras is likely using the upcoming vote to solidify his power.

“There’s a calculus that having accomplished all of this, and getting longer-term debt relief in the meantime, the prime minister might come out of this stronger,” Lesser told FP.

But that gamble is in the hands of Greek voters, who have been on a political and financial roller coaster for the last two months. When it became clear Greece would miss the IMF payment due at the beginning of July, banks closed for weeks, and daily cash ATM withdrawals were limited to 60 euros. The Greek stock market was also shut down. When it reopened after a five-week break, on Aug. 3, it plunged 16 percent and has yet to recover.

Then, as now, the political drama was largely of Tsipras’s making. In July, he called for a referendum on Europe’s austerity demands; 61 percent of voters rejected it. This only hardened European resolve, especially in Germany. Weeks later, Tsipras had to accept harsher austerity than originally proposed by its creditors. Varoufakis called the plan a “fiscal waterboarding.”

A key European official, Eurogroup president Jeroen Dijsselbloem, said he was confident the arrival of a new Greek government would not render these events irrelevant by straying from the path of austerity.

“I recall the broad support in the Greek parliament for the new program and reform package and I hope the elections will lead to even more support in the new Greek parliament,” he said.

The rest of Europe might not be so enthusiastic about more uncertainty. Lesser said this is particularly true in Germany, where Chancellor Angela Merkel risked splitting her political base this week by asking conservative members of her coalition to approve the bailout. Sixty-three members of her coalition voted “no” and many others voted to support her, but only reluctantly.

“It’s a very chaotic scene,” Lesser said, adding, “This was always something of a high-wire act from the very beginning.”

Photo credit: Louisa Gouliamak/Getty Images

David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis

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