Leftist prime minister of Greece Alexi Tsipras forced a raft of austerity measures and tax increases through the Greek parliament last Friday, but it came at the cost of nearly 1/3 of his party either voting against the measures or abstaining. Several members of the ruling Syriza coalition have called for a break from the government for betraying the principles and campaign promises of the party.
The laws, aimed at restructuring Greece's state-owned businesses, pension plans, and tax laws, were demanded by EU creditors in return for a third bailout agreement. Although the measures went against everything he and his party had promised, Tsipras relented to prevent a total collapse of the Greek economy. "I do not regret my decision to compromise," he told the parliament in Athens. "We undertook the responsibility to stay alive over choosing suicide."
It is assumed that Tsipras will call for a vote of confidence in Parliament next week, after the bailout has presumably been approved by the various EU governments and a €3.2-billion debt payment has been made to the European Central Bank. Tsipras had less than 120 votes in favor of the austerity measures from his own coalition, meaning that his government would fail on a vote of no confidence if he did not receive votes from opposition parties.
Who Needs To Approve Greece's Austerity Measures?
The Eurozone committee of finance ministers voted Friday to approve the measures passed by the Greek parliament as sufficient to qualify for a new bailout. Greece requires bailout funds to be released by Thursday, when a €3.2-billion loan payment to the European Central Bank comes due. Here is a list of the governments that need to approve the bailout before then:
Tuesday Aug 18
AUSTRIA (Parliamentary subcommittee) ESTONIA (Special session of parliament) SPAIN (Parliamentary vote)
Wednesday Aug 19
AUSTRIA (Parliamentary vote) GERMANY (Emergency session of Bundestag) NETHERLANDS (Parliamentary vote)
Many of these votes will hinge on the International Monetary Fund agreeing to take part in the bailout. Various EU governments want the IMF not only to pitch in with some funds, but also to police Greece's compliance with austerity measures (an area where Athens's performance is spotty at best).
Why is a Vote of Confidence Being Called?
With the defection of a large portion of his party, it is no longer certain whether Tsipras has the support of a majority of parliament. While the bailout plan passed by a margin of 222-64, with 11 abstentions, over 40 out of 149 Syriza coalition members voted no or abstained. Without the express show of confidence of a majority of parliament, the legitimacy of Tsipras and his government is in doubt.
How Dangerous is This Vote for Tsipras?
While Tsipras is still popular personally with the voters, even after giving in to the Troika, his position as Prime Minister is precarious. The Panhellenic Socialist Movement (PASOK), who only voted in favor of the austerity plan in order to save the country, has already proclaimed that they will not support Tsipras in the upcoming confidence vote. The New Democracy party, which was voted out of power in favor of Syriza in January, have also said they will not support Tsipras in a confidence vote. PASOK holds 13 seats, while New Democracy hold 76.
If the confidence vote fails, the government will be dissolved and new elections called. While a Syriza spokesman has said that they will aim for an absolute majority in the next election (which could come as early as next month), that may be a tough goal with the far left forming a new party. Tsipras may end up needing to build a coalition across ideological lines in order to remain in power. Such an arrangement is inherently unstable, and will do nothing for market confidence.
Frau Merkel Faces Her Own Rebellion
While German Chancellor Angela Merkel has pinned her political legacy on the survival of the Eurozone, she is facing a rebellion at home over pumping even more German tax dollars into Greece. She faces the very real possibility of a fracture in her conservative party, especially since the IMF has not yet agreed to participate. IMF president Christine Lagarde has said that the IMF will make no decision regarding Greece until October, when a review of Greek adherence to austerity measures will be judged. Even so, she continues to maintain that it is impossible for Greece to climb out of debt slavery to the banks unless some of their debt is written off: "I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own."
Without the IMF agreeing to police the deal, approval among the various EU nations may be impossible to secure.
How Much Money is Involved?
The first tranche of the new bailout will amount to €26 billion ($28.8 billion), and will be released on Thursday if all required approvals are met. However, the EU is keeping €10 billion and putting it in the European Stability Mechanism to recapitalize Greek banks, which are nearly insolvent after bank runs. €3 billion will be kept back and used as "doggie treats" over the next two months to reward Greece for implementing various austerity reforms, and €3.2 billion goes toward the payment due the ECB. That leaves €9.8 billion for Greece to pay past due bills, pensions, and government salaries.
Even if the new bailout clears all its hurdles, Greece is still in for years, maybe decades, of political and economic upheaval. It makes one wonder, who would want to be Prime Minister?