Greek prime minister Alexis Tsipras has resigned and called a general election to be held next month to let the country pass judgment on the latest bailout deal.
FTAdviser sister paper the Financial Times reported late yesterday (20 August) that in a televised address, the leader of the leftwing Syriza party said: “I’m putting everything I’ve done to the judgment of the Greek people.”
An interim administration will be appointed to oversee an election, likely to be held in a month’s time.
The move follows key European Union member states agreeing to the terms of the new €86bn (£60bn) international bailout programme, plunging the country back into a period of uncertainty. The European Central Bank confirmed that Athens had repaid €3.2bn (£2.3bn) in bonds that was due on Thursday.
Mr Tsipras acknowledged that he did not obtain the bailout terms that he had wanted, adding that the deal was the best which could be secured in the circumstances.
The election campaign is expected to delay the implementation of fiscal and structural reforms agreed with creditors, since the interim government will lack a mandate to take political decisions.
This could in turn complicate talks due later this autumn on debt relief and a decision by the International Monetary Fund on whether to contribute financially to Greece’s third bailout.
Jennifer McKeown, senior European economist at research firm Capital Economics, commented that the news means the country will struggle to implement its third bailout and secure crucial debt relief.
“Although the Greek parliament approved the third bailout, his resignation was deemed necessary as he failed to secure a majority from within his own Syriza party.
“But the announcement was presumably put off until today’s disbursement of the first bailout tranche to Greece and the government’s associated repayment to the ECB.”
She continued that the election is unlikely to change a great deal, with Mr Tsipras running again, given his earlier pledge to stand by the terms to which he signed up.
“Syriza is still easily the most popular party in Greece (with about 40 per cent of the vote compared to runner-up New Democracy’s 20 per cent, based on a July 18th poll) it should therefore win the election, even if rumours that the radical Leftist wing will announce a breakaway party prove correct,” added Ms McKeown.
She added that given its anti-austerity roots, the remaining Syriza party will still struggle to implement the bailout conditions, especially in the likely event that Greece sinks further into recession.
peter.walker@ft.com
