From bailout to ballot box

By Yannis Palaiologos

Weary Greece goes to the polls — again.

ATHENS — There is no shortage of cynical, mordant commentary among Greeks — on Twitter and in conversation — about the fact that the country is going back to the polls for the third time in eight months. There is mock enthusiasm about being the most democratic country in the world, many references to Prime Minister Alexis Tsipras’ talent for electioneering as opposed to governing, as well as suggestions that the contested date be put to a referendum.
Amidst all that, there are certain key features of the new election, to be held most likely on September 20, that need to be kept in mind.

First and foremost, the stakes will be much lower than in January. Back then, the challenger, Tsipras, vowed to tear up Greece’s bailout agreement and promised Greek voters everything from blocking privatization and erasing a large part of the public debt to repealing unpopular taxes, preventing further pension cuts and delivering a major boost to social spending. His victory inevitably led to a dramatic showdown with the country’s creditors, which led it to the brink of Grexit and back to recession.
This time around, having broken all those promises, Tsipras’s Syriza — or what’s left of it after the defection of the pro-drachma Left Platform faction — will run, albeit grudgingly, as a pro-bailout party.
That means that neither of the parties with a reasonable chance of winning — Syriza and the center-right New Democracy — will challenge the status of the new agreement, leading to a new period of renegotiation and further turbulence. The positive response of German chancellor Angela Merkel to the news of the election — she told Dilma Rousseff, Brazil’s president, whom she’s visiting, that the decision is part of the solution, not the problem — suggests European leaders were in the know and are on board.

Syriza will run, albeit grudgingly, as a pro-bailout party.

This is all the more the case because Tsipras, the likely winner of the election, after being beset by credit asphyxiation and the threat of an exit from the common currency, now sees two juicy carrots dangling before him: the prospect of significant debt relief after the completion of the first review of the new program, and the inclusion of Greek government bonds in the European Central Bank’s quantitative easing (QE) program. The combination of these will lead to a decrease in the country’s borrowing costs and could in time lead it back to the capital markets, as well as rekindle the interest of foreign investors in the real economy.

Price to pay

All this, of course, will depend on implementation, one of the crucial ingredients missing on the Greek side throughout the bailout period — in part because the program’s demands were too tough, but also because Greek politicians were unwilling to tackle long-standing cosy arrangements in the private as well as the public sector. It will take a while to find out how well the new government performs on this front. But if Tsipras fails to win a full majority (again, the likelier outcome), his choice of coalition partner and the make-up of the new cabinet will speak volumes.
So far, he has governed in alliance with the Independent Greeks, with whom Syriza has little ideological affinity — a populist right-wing group whose raison d’être had been opposition to the bailouts (it was formed to oppose the second one in 2012). Picking a centrist, pro-European partner this time around will be a strong indication of an intention to follow through vigorously with implementation of the program. The signal will be even clearer if he eschews party hierarchy and elected MPs to appoint to key portfolios some competent outsiders committed to the agreed-upon reforms.

Now, we face at least two months of inactivity on the implementation front.

The choice to hold an early election is not, of course, without cost.Tsipras may argue that the split in Syriza — almost a third of whose MPs refused to back him in the recent vote on the third bailout — forced his hand. But the bailout passed with more votes than either of the two previous ones, thanks to the steadfast support of New Democracy and the other two pro-European parties, To Potami and PASOK. He could have allowed the Left Platform rebels to form their own parliamentary group and governed with the support of the pro-European opposition to ensure smooth implementation of the new program and the benefits that would come with it.
Now, we face at least two months of inactivity on the implementation front, given the slow pace with which new ministers are brought up to speed and can begin meaningful work in Greece. This means that the negotiations on the debt will begin later, and Greek participation in QE will also be delayed. It may also lead to a worsening of the recession for this year and a further increase in the cost of recapitalizing Greece’s banks. It is a high price to pay to resolve the ruling party’s internal divisions — a resolution which should have come before the January election.
Yet there’s nothing to be done about that now. The electoral die has been cast and, arguably, a Syriza cleansed of those elements who would prefer a return to the drachma over the new bailout will make the country more governable. But the success of the new program will depend crucially on the attitude of the man who will probably remain prime minister after the election. Announcing his resignation on August 20, Tsipras spoke again of the “blackmail” and the “ultimata” that he suffered at the hands of the creditors. He has repeatedly said that he does not believe in the new program. It is only when he is defending himself against the Left Platform that he highlights positive elements in it.
That needs to change. He must find a way to embrace the program and sell it to a Greek public that still gives him the benefit of the doubt. Otherwise its implementation is likely to get bogged down once again, tensions with creditors will flare and the Greek economy will remain stuck in the mud.