Under the Greek constitution, if a government has been in power for less than a year and tenders its resignation to the President, other political parties are offered the chance to see if they can form an administration and take up the mandate. With the resignation of the Tsipras government on Thursday, the constitutional question ceased to be theoretical and political parties (and factions) have been trying to assemble the required support.
It would seem highly unlikely that any group will emerge with the level of support needed to govern and a fresh election is likely to be held as early as the 20th of next month (plenty of time, if you recall how quickly the Greeks can set up a referendum…).
It was inevitable that Mr Tsipras would find his position untenable. In order to stop Greece from an immediate and very painful exit from the Euro, he had to agree to a third bailout from the Eurozone (worth €86 billion over three years). However, creditors made it clear that their support was contingent upon Greece passing key pieces of legislation. The Greek administration made their distaste for the deal and its conditions very public, but claimed it to be the nation’s only realistic solution. During the parliamentary debates, part of the Syriza coalition abstained and others opposed the government (totalling 43 members of its 149 bloc) which had to rely on opposition support to get the bills home. The rebellious factions of Syriza screamed of betrayal and the party has now split with the formation of Popular Unity, attracting 25 former Syriza members.
Given that it must be clear to the Greek people that the rest of the European Union nations will not agree to tear up Greek debt and that continued “reforms” (austerity is such an ugly word) will be needed to put the nation on a sustainable footing, it is difficult to see what the rump Syriza or Popular Unity can offer going forward. If this analysis is right, it would seem that the Greek people will be forced to choose between the former ruling parties with far right and far left parties largely attracting the protest vote.
Whilst a change of government will inevitably cause anxiety and instability in the markets, the new administration is likely to be more amenable to the suggestions of the IMF and Eurozone than Syriza has been. Given the roiling fire-storms of the Chinese stock market meltdown, the Greek situation has hardly made a footnote in the business news since the election was called.
