How America Can Shore Up Asian Order
A Strategy for Restoring Balance and Legitimacy
On August 20, just hours after Greece received the first tranche of its 86 billion euro bailout and just seven months after he assumed office, Greek Prime Minister Alexis Tsipras resigned his post and effectively triggered new elections, scheduled for September 20. Tsipras’ sudden resignation has raised concerns that the political uncertainty surrounding new elections will further damage Greece’s ailing economy and slow down the reform process to which Greece has committed itself as a condition of its EU bailout.
Although the outcome of the elections is uncertain, the most likely scenarios all involve Tsipras returning to power. Despite having caved in to creditor demands and reneged on his promise to end austerity, Tsipras remains enormously popular in Greece. Today, the firebrand former communist is the only political figure who appears capable of assembling a majority government and pushing through the austerity measures and structural reforms that the EU is demanding. Greece’s EU creditors spent the past year battling with Tsipras, but now, in a delicious irony of the eurozone crisis, they have every interest in seeing him triumph at the ballot box.
In dissolving the current government, Tsipras is trying to reassert control over his fractious party, Syriza, and even perhaps to reinvent himself as a leader of the center-left. When Tsipras accepted EU creditors’ terms for a third bailout, he lost the left wing of Syriza, and with it his working parliamentary majority. This rupture was obvious as early as August 14, when 42 of Syriza’s 149 members of parliament refused to support the EU bailout deal, forcing the government to rely on opposition parties to pass the measures. The splintering of Syriza was formalized on August 21, when 25 parliamentarians from Syriza’s Left Platform broke away and formed a new party, Popular Unity, under the leadership of Panagiotis Lafazanis, the Marxist former energy minister.
Although the outcome of the elections is uncertain, the most likely scenarios all involve Tsipras returning to power.
Popular Unity, which is now the country’s third-largest party, maintains a defiant anti-EU, anti-bailout stance and advocates a return to the drachma. The new party claims to represent the majority of Greeks who voted no in Greece’s recent anti-bailout referendum and whom—party officials argue—Tsipras has betrayed. By dissolving his own government, Tsipras has succeeded in purging his party of such rebels. He is gambling that voters will not follow Lafazanis out the door, that more defections of key Syriza personnel will not occur, and that the new elections will return him to power, backed by a more cohesive party firmly under his control.
Snap elections in September are well timed for Tsipras. He remains by far the most popular politician in Greece: a July poll showed that 61 percent of Greeks held a positive view of him. He enjoys significant support even among opposition party voters: 45 percent of New Democracy, 49 percent of Potami, and 65 percent of PASOK supporters say that they have a positive view of the way he is handling his responsibilities as prime minister. This high favorability rating likely reflects a combination of Tsipras’ personal appeal and people’s relief that the standoff with the EU ended without a return to the drachma.
Tsipras will also profit from the fact that some of the benefits of the new bailout can already be felt. The withdrawal limits and capital controls that suffocated the Greek economy are being eased as the first installment of EU bailout cash has started the process of recapitalizing Greece’s banks.
Most of the costs of the new bailout, meanwhile, will be felt only after the September 20 election. With the exception of the sharp increase in value-added tax rates last month, most of the painful policy changes—the overhaul of the pension system, the opening of closed markets, tax increases for farmers, and labor law reforms that make it easier to lay off employees and limit the ability of unions to strike—have been left for the new government to enact and enforce.
Finally, August is the month when Greeks, including the political class, leave politics behind for the beach. Tsipras’ surprise resignation found half the parliament and many of the country’s voters on summer holiday. This means that the new Popular Unity party and the traditional opposition parties must launch their electoral campaigns with large sections of the population tuned out of politics.
The political climate in Greece now clearly favors Syriza, but an outright electoral victory is unlikely.
Tsipras’ main gamble is that the elections will bring a clear majority for Syriza. EU leaders should welcome this outcome because it would bring political stability to Greece, tie Tsipras to the political center, and increase the likelihood that reforms will be implemented. If Syriza is able to keep some of the unions on its side, the reforms may be enacted with less social turmoil than has traditionally accompanied such efforts. Yanis Varoufakis, the former finance minister, was known for his flamboyant, confrontational style, but Tsipras’ post- Varoufakis team has an excellent working relationship with the European institutions—the European Central Bank, the European Commission, and the European Stability Mechanism—and the International Monetary Fund. That increases the chances that Greece can extract some form of debt relief in the coming months.
Could Syriza win an outright majority? Since the Greek electoral system awards fifty bonus seats to the largest party, Syriza would need roughly 39 percent of the vote to secure an absolute majority in parliament. The last two national electoral polls, conducted in mid-July, days after Tsipras signed the third EU bailout agreement, showed support for Syriza ranging from 33.6 percent to 42.5 percent, but an August 23 poll showed the party at 28 percent, and this weekend’s polls put Syriza between 22 and 25 percent—a notable decline. The polls notwithstanding, Tsipras is counting on his personal approval ratings to pull Syriza higher in the September election. Indeed, between 56 and 60 percent of Greeks expect a Syriza victory in September.
EU leaders should welcome a Tsipras victory because it would bring political stability to Greece, tie Tsipras to the political center, and increase the likelihood that reforms will be implemented.
Even if it does not win an outright majority, Syriza is very likely to remain the largest party in parliament. In this case, a few likely scenarios emerge. One possibility is that the Independent Greeks (ANEL) may scrape together enough votes to enter parliament and resume their position as Syriza’s junior coalition partner. Despite their vast differences in ideology, the two parties have been able to form a working coalition. With Syriza free of its internal opposition, Tsipras will be able to go back to the business of implementing the bailout.
A second possibility—which recent polls suggest is more likely—is that the Independent Greeks will not make the three percent cut to join parliament, and Tsipras will need other partners. The new Popular Unity party, the Communist Party (KKE), and Golden Dawn are not feasible coalition partners for Syriza because of ideological differences. This leaves the traditional opposition parties—New Democracy, PASOK, and Potami—as the only potential partners likely to be large enough to form a majority with Syriza. Coalitions between Syriza and any of these parties would be hard for both sides to swallow. Syriza rose to power in January by rejecting the so-called old guard of politicians associated with these parties, and bad blood runs deep on both sides. But as distasteful as such a coalition might be, Greece’s EU partners could exert enormous pressure on the Greek opposition parties to join Syriza in a broad coalition government. Tsipras has signaled that he will not be the prime minister of such a coalition, but he implicitly left open the possibility that Syriza could be part of such a government under a different leader. The first evaluation of the Greek reforms, to which additional EU financing is tied, will be in late October. Failed coalition negotiations and renewed political uncertainty would put the funding in jeopardy. Although a coalition of centrist parties and Syriza might be unable to survive a full four-year term, it could still provide enough stability to guide the country out of the throes of the crisis.
Although considerable risks and uncertainties remain, the most likely outcome of Tsipras’ gambit is that he will emerge from the September election with a new mandate. In truth, many of his harshest critics may favor this outcome. The moderate opposition recognizes that whoever comes to power next will have to suffer the heavy political costs associated with implementing the bailout, and many may secretly prefer a clear Tsipras victory so that these costs fall squarely on his shoulders. As Greek opposition leaders have reminded citizens repeatedly in recent weeks, “It is Tsipras’ bailout, after all."