Yesterday Tsipras capitulated, putting 5 months of "memorandum scrapping" negotiations to rest, as Greece finally realized that in a centrally-planned world where it had hoped a market selloff would boost its negotiating leverage, whatever the ECB wants the ECB gets, and the ECB retaliated in kind by freezing Greek deposits and forcing capital controls which proved to be the straw that broke the Greek negotiating back.
Perhaps the most telling part of Tsipras' capitulation speech last night was that Greeks "can understand the difference between those who fight with their soul in battle and resist, and those who hand in their weapons and give up with no resistance. The outcome of these negotiations is of course not what we wanted."
In any event, while Tsipras won a small political victory, he lost the governmental war, and last night's vote cost him his majority coalition, after 32 Syriza members vote No, including Varoufakis, and 6 abstained.
As a result, the immediate next step for Tsipras will be a government reshuffle. As the WSJ reports [6], "to counter the rebellion within his party, the Greek premier is expected to announce a cabinet shake-up on Thursday, according to government officials. But it remains uncertain how long Mr. Tsipras can continue in office without calling new elections.
The vote “is a serious division in Syriza’s parliamentary group,” said a government spokesman. “The basic priority of the prime minister and the government is the successful completion of the agreement in the coming period."
WaPo adds [7]:
Greece braced for a political shakeup Thursday after lawmakers approved a new era of austerity, a bitter turnabout that split the ruling party and spelled fresh economic pain for many in this struggling nation.
Prime Minister Alexis Tsipras was expected to purge his inner circle of dissenters after he was forced to push for the very belt-tightening policies he once campaigned against. He said that without the about-face, his nation would have been doomed to a humanitarian catastrophe.
* * *
The defectors included several members of Tsipras’s cabinet. Among the outcomes from the split could be the fall of Tsipras’s government and possible new elections — with all the fresh complications they could bring if anti-bailout forces gain ground.
At a minimum, Tsipras will be tasked with implementing unpopular measures with a greatly weakened base of support. In the end, 229 of the 300 members of the Parliament supported the bailout laws, but much of the support came from opposition parties.
As lawmakers hurled insults at one another ahead of the vote, anti-austerity protesters and riot police traded molotov cocktails and tear gas outside Greece’s neoclassical Parliament building.
Such clashes were a regular feature of anti-austerity demonstrations during the early years of Greece’s debt crisis. But recently they have been rare, and this was the first of any significance since Syriza came to power in January.
There was powerful symbolism in the half-hour burst of violence. Tsipras and his partners — who not long ago were manning the barricades against the authorities — now overseeing the crackdown on their anti-austerity base.
And confirming the new elections are indeed just around the corner, moments ago Reuters reported:
- GREEK INTERIOR MINISTER VOUTSIS SAYS SNAP ELECTION MAY BE HELD IN SEPTEMBER OR OCTOBER.
In short, just as Europe is preparing to implement a bridge loan (one which will be used up in 2 weeks after all the accrued IMF and upcoming ECB payments are made), and is starting debate on just what the Third Greek bailout will look like, Greece is about to commence yet another electoral campaign and the looming question: will anyone assume political ownership for a bailout which even Tsipras said he does not believe in.
While Tsipras' popularity is still very high, all it will take is for another anti-austerity group to promise tearing apart the latest and greatest "Memorandum" to win the support of the people, and for Europe to realize that just as its funds are being transferred, Greece may end up with a new government which is even more acutely positioned against the harhest austerity terms yet, this time coupled by an abdication of sovereignty, thus also incorporating the nationalist elements in the electoral process.
And unlike the last time, Greece now know what the worst case is, and as a result it will (or should) be actively preparing for Plan B: launching its own currency - after all even Germany now is pushing for a Grexit and what Germany wants, Germany also gets - if and when the next (and perhaps final) confrontation between the ECB and Greece arises.
