Friday, 20 January 2017

The argument for a Greek election

While the government's official position remains that Greece will hold its next election in 2019, the corridors of parliament are buzzing with rumour that Prime Minister Alexis Tsipras may announce one by the end of this month. 

This would essentially be an abdication. The latest opinion poll out today gives him just 16pc of the vote, versus 30pc for the conservatives, and is in line with polls over the past few months. Nonetheless, he may have come to the end of the road as far as implementing the adjustment programme is concerned. Some Syriza MPs are in open rebellion as he struggles to negotiate his second assessment. He is being asked to allow mass layoffs - practically inconsequential, but symbolically powerful to the left - and to demonstrate how he will generate a 3.5pc primary surplus in 2018. Some of the money may have to come from higher sales tax. He may decide to throw in the towel before his approvals go down even further. 

The second rationale for an election now rather than later in the year is that an election held within 18 months of the previous one, i.e. mid-March, is not contested by individual MPs fighting for their constituency in the classic fashion. Instead, party leaders hand pick a number of MPs in accordance with their share of the national vote. This would enable Tsipras to campaign with his MPs' mouths shut and lose with the highest possible share of the popular vote. 

Apart from regime change in Greece, a political crisis here could affect the German election. An analysis in Suddeutsche Zeitung is that a Greek implementation debacle "can cause terrible damage in Germany and Europe" by exposing the federal coalition's European policy - loans in return for austerity - as flawed. Scheauble sold the third Greek bailout to the Bundestag partly on the basis that the IMF would oversee it. The IMF is currently only an observer, it disagrees with the Europeans on whether this programme can generate a 3.5pc surplus, and it has openly clashed with Germany over the need to restructure the Greek debt. 

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