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Greek Prime Minister Resigns, New Elections Called

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Greek Prime Minister Resigns, New Elections Called
greek statue

The leftist prime minister of Greece, Alexis Tsipras, announced today in a nationally televised address that he would be stepping down and dissolving his seven month-old government.

Tsipras and his "Coalition of the Radical Left" (SYRIZA) were elected in January on promises to end "humiliating" austerity programs forced on Greece in two bailout deals, but after months of contentious negotiations and brinkmanship, knuckled under to creditor demands in order to keep Greece in the Eurozone.

Tsipras said in his announcement that he had felt compelled to accept the severe conditions of the new bailout offer, as polls showed that most Greeks wanted to stay in the EU. Since this action was directly opposite of the promises made during the election, he said that he had a "moral and political obligation" to return to the polls. Announcing the snap elections, the second such in under a year, he said "The political mandate of the 25 January elections has exhausted its limits and now the Greek people have to have their say."

Why is the Greek Government Dissolving?

While the bailout program passed the Greek parliament last week, it only did so on the votes of opposition parties. 43 of the 149 members of parliament in the ruling coalition either voted "no" or abstained. This means that Tsipras has effectively lost his majority. Leaders of Syriza's coalition member, the conservative anti-austerity "Independent Greeks" party, stated that they only voted yes to save the nation, and would vote "no" if a vote of confidence in the government was held, as did the leaders of New Democracy and other, smaller, parties.

Greek Prime Minister Alexis Tsipras Greek Prime Minister Alexis Tsipras


It was widely assumed that Tsipras would call for a vote of confidence after using the first tranche of bailout funds to pay a €3.2 billion debt payment due the European Central Bank today. It seems though that he decided to forego the political fallout of possibly failing that vote (which would have triggered new elections), and force a new election by resigning.

The Independent Greeks have no reason to continue working with Syriza, as the only thing they had in common was opposition to the austerity measures imposed by the "Troika" of the EU, ECB, and IMF. Tsipras concluded that not having a working majority at such a critical juncture would cripple any chances of following through with privatization and reform measures mandated by creditors.

Tsipras still enjoys high personal approval ratings, and anticipates that the average Greek will agree that he fought courageously against the creditors before giving in. By skipping the stigma of losing a vote of confidence, he will preserve some of that support. Another major reason for dissolving the government and holding snap elections is to get a mandate from the masses before the new austerity programs really start to bite.


What Happens Now?

The Greek Constitution states that if a government falls with in the first 12 months of its formation, that the President will give the second-largest party (in this case, the conservative New Democracy party, who lost power to Syriza in January) three days to form a government. If they fail to do so, then the next-largest party, the fascist Golden Dawn, will get three days to try. If neither are able to form a ruling coalition, then general elections are called, to be held no more than 30 days afterward. The opposition can speed the process along by refusing to accept the mandate from the President.


The Syriza party has already effectively split along the lines of the bailout vote, with the ousted Energy Minister Paniogotis Lafazanis leading the rebels. A party congress would give the chance to attempt to heal the rifts (unlikely) or form a new united front to the voters. Party officials have expressed the intention of trying to win an outright majority in the upcoming election, a tall order to fill. The last majority government was that of the Socialists (PASOK) under George Papandreou in 2009, which lasted two years.

In the meantime, a caretaker government led by president of the Greek Supreme Court will manage government affairs until the election. Being a stanch anti-austerity advocate, there's little chance of further reform or tax laws being passed in the meantime.

Uncertainty in the Aegean

These developments have unsettled the markets. The bonds of other trouble southern European nations Italy, Spain, and Portugal fell on the news, and the Greek stock market fell over 3.5% on the news, with bank stocks falling 13.5%.


Syriza is the first radical left political party to hold power in modern Greek history, and the failure to reverse austerity measures have doubtlessly cost them some support. While Tsipras himself will certainly win his seat in parliament again, the split of 1/3 of its members puts Syriza on nearly equal footing with New Democracy. A center-right pro-austerity coalition could quite possibly be running the next government -- an idea that would certainly ease the worries of the nation's creditors.

Another wild card is the fascist Golden Dawn party, whose leaders were elected to parliament while in jail on terrorism charges (since dropped.) Golden Dawn has a violent anti-immigration policy, and the flood of refugees from the war in Syria could serve to allow them to build on the 17 seats they currently hold. There is a long history of violence, including bombings, between Golden Dawn and far-left parties in Greece.

There may be a slight chance of left-wing and right-wing anti-austerity parties joining together to nullify the recent bailout reforms, just as Syriza did seven short months ago, before running into the brutal reality that you can't win against the Big Banks.

About the Author

Everett Millman

Steven Cochran

Precious Metals Market Analyst
BS University of South Florida (2002)

A published writer, Steven's coverage of precious metals goes beyond the daily news to explain how ancillary factors affect the market.

Steven specializes in market analysis with an emphasis on stocks, corporate bonds, and government debt. He writes a monthly review of the precious metals markets for

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