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Why Greeks Are Turning Against Their Rebel Leader

Why Greeks Are Turning Against Their Rebel Leader

(Bloomberg) --

The Greek crisis that began in 2009 and dragged on for eight years has subsided, thanks to tight government spending and billions in bailouts and writedowns. But the political aftershocks from the country’s worst downturn of the modern era are still reverberating. Greece’s left-wing Prime Minister, Alexis Tsipras, who promised relief from austerity imposed by Greece’s creditors -- and then capitulated when they turned the screws -- has called snap elections for July 7. He could lose his job to a center-right politician known for market-oriented, investor-friendly policies.

1. What brought on the snap vote?

Tsipras was elected in 2015 amid the crisis that nearly resulted in Greece’s exit from the euro zone. He was meant to serve until scheduled elections in October. But his Syriza party has hemorrhaged popular support for reasons ranging from failed promises to a row over one of the country’s neighbors. The May vote for Greece’s members of the European Parliament revealed the depth of the slide, as the rival New Democracy party, led by 51-year-old center-right Kyriakos Mitsotakis, topped Syriza by more than 9 percentage points. That left Tsipras little choice but to call an early general election, in hopes that a quick vote limits the damage to his party.

2. What happened to Syriza’s backing?

Persistent high unemployment and lower living standards have tested the public’s patience and driven Syriza’s support down to just around 24% of voters. Tsipras tried to appease the populace in early May with a $1.6 billion package of handouts that raised alarm among Greece’s creditors. He has faced constant challenges since his dramatic 2015 victory, surviving five confidence votes, a referendum and a sudden election just eight months into his term. A savvy political operator, Tsipras managed to swing his once-fringe leftist party squarely behind the deep government spending cuts and other financial strictures imposed by the so-called Troika of institutions -- the European Commission, European Central Bank and International Monetary Fund -- that oversaw Greece’s bailout. But other challenges have arisen, among them a bitter controversy over the name of Greece’s northern neighbor.

3. How does that involve Tsipras?

The former Yugoslav state, a land-locked nation of 2 million adjoining Greece, declared itself the Republic of Macedonia in 1991 when it gained independence after Yugoslavia’s disintegration. Greece objected, arguing that the name belongs to its own northern region, which was Alexander the Great’s stronghold in ancient times. To defend its claim, Greece blocked Macedonia’s efforts to join NATO and the European Union. After Tsipras and Macedonian leader Zoran Zaev agreed last year to change the country’s name to North Macedonia and free up its path to join the alliances, Tsipras’s nationalist coalition partner, Panos Kammenos, took his party out of the government in protest. Mitsotakis has said that his party reserves the right to veto North Macedonia’s EU accession if he comes to power.

4. Is this the end for Tsipras?

It’s not looking good, but political experts caution against writing off the charismatic 44-year-old firebrand. Mitsotakis, who has vowed to continue with the country’s reform agenda, will most likely be the country’s next prime minister, but Tsipras’s party will still be a strong second in parliament. A graduate of Harvard and Stanford universities, Mitsotakis served as Greece’s administration and reform minister from 2013 to 2015. He has vowed to kick-start lagging privatization projects, with investment in the former Athens airport a top priority, and has a liberal agenda that includes vigorous cost-cutting in state spending and reforming the Greek health insurance system.

5. How big could New Democracy win?

It won’t necessarily secure a knockout. 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 contenders in the EU election, the Mera 25 party started by former Finance Minister Yanis Varoufakis, may get enough support to elect lawmakers. That means six or even seven parties could be seated, making it hard for Mitsotakis to win a majority of the 300-seat chamber. He’ll probably have to form a coalition government with another party or parties.

6. Will this mean market instability?

Not necessarily. The markets are already pricing in a victory for New Democracy, with the yield on Greece’s 10-year bond dropping to a record low on May 27 after Tsipras called the early national ballot. Many analysts expect that even if New Democracy has to assemble a coalition, it won’t have trouble finding allies. So a prolonged period of instability and failed attempts to form a government looks unlikely.

The Reference Shelf

--With assistance from Antonis Galanopoulos.

To contact the reporter on this story: Eleni Chrepa in Athens at echrepa@bloomberg.net

To contact the editors responsible for this story: Sotiris Nikas at snikas@bloomberg.net, Andy Reinhardt, Paul Tugwell

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