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Doing the splits

11 Jul 2015 By Hugo Dixon

Syriza’s split is the best news coming out of Greece all year.

Prime Minister Alexis Tsipras secured overwhelming parliamentary backing early on July 11 for his U-turn on austerity and reform, but his radical left party has splintered in the process. A new government, which is more serious about implementing whatever bailout programme is negotiated with creditors, will now probably emerge even though the exact mechanics of putting one together are unclear.

There is, admittedly, so far no deal with the euro zone lenders and the International Monetary Fund. The Greek parliament has backed Tsipras’ proposal. But the creditors will demand further concessions. That said, having capitulated, it is unlikely the Greek prime minister will do yet another U-turn.

Although 251 out of the 300 members of parliament backed Tsipras’ proposal, it only passed with the help of the opposition. The prime minister could only count on 145 MPs from Syriza and his far-right allies, the Independent Greeks – six short of a majority.

What’s more, 15 of the Syriza MPs who backed Tsipras made clear that they opposed the programme, and there are others who may peel off in the future. So the government cannot continue as it is. There are three main options for forming a new one.

The first is to create a technocratic government supported by Syriza’s more moderate elements and the three pro-European opposition parties, New Democracy, To Potami and Pasok. Such a government would have a strong majority.

In this scenario, Tsipras would hand over to a new apolitical prime minister such as Panagiotis Pikrammenos, a judge who was briefly prime minister in 2012, or Yannis Stournaras, the central bank governor who was previously finance minister. The new prime minister would pick a group of competent ministers to implement the plan.

One drawback with this option is that the technocrats would lack democratic legitimacy. Another is that their government would fall if Tsipras decided to pull the rug from under them. This happened to Lucas Papademos, a former central bank governor who became prime minister in 2011 but was not allowed to finish the job after New Democracy abandoned him.

That said, a new technocratic prime minister could mitigate these risks by calling a referendum to back whatever deal was agreed with creditors. This would expunge the result of the July 5 plebiscite, which voted against a previous set of bailout proposals, and so gain democratic legitimacy for the technocrats.

A second option would be to form a grand coalition between Syriza’s moderates and the three pro-European parties. The main difference between this and a technocratic government is that Tsipras would stay prime minister and most of the ministers would be politicians.

In such a scenario, Tsipras would probably be able to rely on only 100 or so Syriza MPs. As a result, a grand coalition would be fairly evenly balanced between Syriza and the opposition, meaning its centre of gravity would be fairly moderate, increasing the chances that the programme would be successfully implemented.

There would still be a risk that Tsipras would tire of pushing through unpopular measures. But the opposition could mitigate that by saying they would not join such a coalition until Tsipras had shown for at least a month that he was serious about reform. They could also insist on a second referendum to give legitimacy to the programme they were going to help implement.

Tsipras won’t like either a technocratic government, under which he surrenders power, or a grand coalition, where he has to share it. So he may flirt with a third idea: forming a coalition with just To Potami. But the centrist party has rightly said it won’t go into government with Syriza if it is still allied with the Independent Greeks. This means it will be mathematically impossible for Tsipras to create such a mini coalition.

That would leave him with one more option: calling new elections either now or in a few months. These should only be contemplated if the euro zone makes clear it is willing to keep Greece’s banks afloat until after a vote. But assuming the creditors do what it takes to prevent a collapse of the financial system during the campaign, new elections could be a good option.

Tsipras would probably win such a vote. Under Greek law, if there is an election within a year of the previous one, party leaders can pick whichever candidates they like. Tsipras would, therefore, be able to kick out all the rebels and replace them with more moderate MPs. He would, therefore, return as prime minister with a party that was more willing to implement the bailout programme.

The Greek prime minister might, of course, lose the elections. Although this doesn’t seem likely at present because the opposition is in disarray, the three pro-European parties have been holding talks about forming a common front. If they were able to get their act together in time, they might just win. Such a victory would also be a good outcome because the new government would be committed to delivering on Greece’s promises to its creditors.

So the country’s political outlook is now murky. But the chance that Greece will implement any deal has risen.


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