Greece's New-Found Stability Put to Test as Tsipras on Brink
(Bloomberg) -- Greece’s political class is about to test investors’ confidence that the country’s years of turbulence are a thing of the past.
Prime Minister Alexis Tsipras’s political future is on the line this week after a coalition breakdown prompted him to call a confidence vote in parliament set for Wednesday, raising the risk of an early election.
His two-seat majority is a reminder that post-bailout Greece remains brittle at a time when the euro area’s biggest countries are also struggling to provide leadership.
The Athens Stock Exchange fell 1.3 percent in early trading Monday, while an index of Greek banks lost as much as 3.3 percent. Yields on 10-year bonds remained stable at 4.3 percent.
With campaigning underway for an election that isn’t due until September, polls suggest an early vote might hasten a shift of power to the center-right opposition, New Democracy. For his part, Tsipras has pledged to serve out his term and see through measures to stabilize the economy after years of fiscal austerity.
The survival of Tsipras, who led Greece through high-drama bailout standoffs and forged an unlikely bond with German Chancellor Angela Merkel, hinges on his coalition partner, the Independent Greeks, whose seven seats in the 300-member parliament give it power beyond its numbers. Tsipras’s Syriza holds 145 seats.
Defense Minister Panos Kammenos, who heads the Independent Greeks, bolted from the government on Sunday after breaking with Tsipras over a name dispute with neighboring Macedonia. Yet some of the party’s lawmakers may want to keep the governing coalition alive.
Tsipras could also try governing without a fixed parliamentary majority if he loses the confidence vote. He has pledged that Greece won’t return to the polls until the government pushes through a constitutional reform, legislation to protect homeowners and a higher minimum wage. Polls suggest opposition leader Kyriakos Mitsotakis’s New Democracy would win the most votes if Greece held an election now.
“An early election is good news for investors,” said Wolfango Piccoli, co-president of London-based consultants Teneo Intelligence. “The country has been in election campaign mode for weeks, and the sooner the elections take place the better.”
Calling an early election has its pitfalls, as U.K. Prime Minister Theresa May can attest. Even so, Tsipras might favor a vote before European Parliament elections on May 23, where his party risks heavy losses.
While Greece emerged from a series of bailouts in 2018, Tsipras’s woes reflect broader uncertainty sweeping Europe at a time of geopolitical shifts -- from a lame-duck Merkel in Berlin and violent protests in France against President Emmanuel Macron’s policies to a surge in populism that may play out in European Parliament elections in May.
“If anything, the exit of Kammenos helps clear some of the uncertainty of the last few days which were marred by his backpedaling,” said Mujtaba Rahman, managing director at Eurasia Group in London.
Tensions between the two partners climaxed last week over the agreement Greece sealed with the former Yugoslav republic of Macedonia to change its name to Republic of North Macedonia. Kammenos says the new name shouldn’t refer at all to Macedonia, which many Greeks say should apply only to their country’s north, the ancient stronghold of Alexander the Great.
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