Greece: Tsipras re-elected with decisive mandate, faces daunting to-do list
September 24, 2015
Prime Minister Alexis Tsipras consolidated his power and was re-elected on 20 September in Greece’s second election this year despite his previous tenure being characterized by fraught bailout negotiations, policy U-turns and dissent from within his own party. Tsipras’ party, SYRIZA, won 35.5% of the vote and 145 out of 300 seats in Greece’s Parliament, a decisive victory and just four seats shy of the result tallied in January’s elections. However, turnout was remarkably low at 56.6% illustrating voter fatigue and disaffection with Greek politics. New Democracy, which had been closely trailing SYRIZA in pre-election polls, came in second with 28.1% of the vote and 75 seats, which was virtually unchanged from last election’s result. Tsipras was sworn in as Prime Minister on 21 September after forming a coalition with his former partners, the far-right Independent Greeks.
The new Tsipras government faces a daunting to-do list in the coming weeks in order to fulfill Greece’s EUR 86.0 billion in bailout pledges. The country has to pass a number of economic reforms and spending cuts all before 20 October, including difficult measures regarding pensions and taxes on farmers. In addition, politicians must draft two different budgets—one for the remainder of this year and one for next—and present a timetable for implementing reforms at a meeting of Eurozone finance ministers on 5 October. Moreover, Tsipras is pushing for debt relief and hoping that a positive first review of the country’s bailout program will help him negotiate with creditors in October.
Although the Greek government faces a formidable list of tasks, the election result is positive for Tsipras’ mandate. The fresh elections allowed Tsipras to return to power with more support and without the deep divisions among party members that had characterized his last coalition government. Popular Unity, a new party formed by 25 former members of SYRIZA, failed to win any seats in the election. Paolo Pizzoli, Senior Economist at ING adds:
“In principle […] the coalition [is] vulnerable to potential defections on adjustment/reform fatigue. However, at least in the short run, the risk of renewed internal uproar appears contained, as the new government will have strong incentives to proceed along the dictates of the memorandum. These firstly relate to the pending emergency of lifting capital controls and restoring, after bank recapitalisation, full functionality to the banking system to support the real economy.”
While in the near-term risks to the bailout agreement or political upheaval appear to be rather minimal, greater uncertainties loom ahead. Namely, there is still a possibility that the third bailout agreement could suffer from the same hurdles as the second bailout did—stalling or backtracking on reforms by the government, the Greek economy performing worse than expected or overly-optimistic assumptions, and an inability or unwillingness to meet fiscal targets in the long-term.