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Greece’s Snap Election: All You Need to Know

Greece's Snap Election: All You Need to Know

(Bloomberg) -- Greek voters will return to the polls in snap elections, in early July, following Prime Minister Alexis Tsipras’s defeat in European Parliament elections on Sunday. Here’s all you need to know about the process, the scenarios and what will lead to the formation of a new government:

Why now?

Tsipras’s four-year term doesn’t officially end until October. However, Kyriakos Mitsotakis’s New Democracy pummeled the ruling Syriza party on Sunday, winning the EU poll by 9 percentage points. That left Tsipras little choice but to call a snap ballot. Tsipras is hoping an early election can limit the damage for Syriza: the leftist party has been hemorrhaging support for some time.

When will elections be held?

Tsipras will meet with the President of the Hellenic Republic Prokopios Pavlopoulos on Sunday or Monday to make an official request. Under Greek law, the vote can be held at least 21 days after it’s officially called and no later than 30 days. A decree dissolving the current parliament will be issued by the president shortly after the meeting. By convention, parliamentary elections are held on Sundays.

So, is Tsipras’s reign over?

It’s not looking good for the 44-year-old Tsipras. Mitsotakis, who has vowed to continue with the country’s reform agenda -- as demanded by its creditors in the euro area and the International Monetary Fund -- looks like he’ll be the next premier. The 51-year-old Harvard graduate served as administration and reform minister from 2011 to 2015. He’s known for his market-oriented, investor-friendly policies.

Are we talking about a full majority for New Democracy?

Not necessarily. The number of parliamentary seats the top vote-getter is awarded, depends on how many parties reach a minimum 3% threshold. One of the new players from the EU election, former Finance Minister Yanis Varoufakis’s Mera 25 party, may get enough support to elect lawmakers. That means that six or even seven parties could be seated in parliament, making it hard for Mitsotakis to secure a full majority of 151 seats in the 300-seat chamber.

Does that mean instability for markets?

Not really. The markets are already discounting a win for New Democracy, with the yield on Greece’s 10-year bond dropping to a record low on Monday. Many analysts expect that even if New Democracy needs to put together a coalition, it won’t have trouble finding allies. So a prolonged period of instability and failed attempts to form a government looks unlikely.

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