Tsipras Threatens Snap Elections As Syriza Rebellion Threatens To Derail Bailout

On Tuesday we documented the rapid collapse of the Greek economy. According to data presented at an extraordinary meeting of the Hellenic Confederation of Commerce and Entrepreneurship, retail sales have fallen 70%, while the The Athens Medical Association recently warned that 7,500 doctors have left Greece since 2010. 

To be sure, assigning blame for the economic malaise is difficult as it’s still largely unclear whether internal structural problems or externally imposed belt tightening deserve the lion’s share of the blame, but there certainly does seem to be a growing consensus among impartial observers that creditors’ insistence on the implementation of still more austerity in the middle of what amounts to a depression may be a fool’s errand - especially with capital controls serving to constrain economic activity. 

It is against this backdrop that Greek PM Alexis Tsipras will attempt to pass a third set of prior actions through parliament - this will be the first such vote to take place with representatives of the "Quadriga" on the ground in Athens. As we noted on Tuesday, "if creditors aren't satisfied with the progress by August 18 (i.e. if for any reason Tsipras doesn’t manage to get the third set of bailout prerequisites by lawmakers), then paying the ECB on August 20 won't be possible and then it's either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the economy but the banking sector and then, in short order, the government. And through it all, the PM is attempting to beat back a Syriza rebellion (which will only be exacerbated by the upcoming vote on the third set of measures) while convincing the opposition that he's not secretly backing the very same Syriza rebels in their attempts to forcibly take the country back to the drachma." 

On Wednesday, Tsipras spoke out about the new bailout "deal", debt re-profiling, the referendum, and party politics in an interview with Sto Kokkino radio station. 

As Bloomberg reports, the Prime Minister "says that his mandate was to stop destruction of Greece [and that] things have changed" for the country and for Syriza. "The Greek people voted 'no' to a bad deal, they did not vote for an exit from the euro. Now some people are trying to manipulate the results," he continued.

Tsipras went on to accuse creditors of not negotiating in good faith, noting that the "quartet" of institutions wasn’t independent. As for the referendum call, Tsipras says he "had no other choice" and that the plebiscite was "high risk." As for abandoning the Greek "no" vote, Tsipras appears to have laid the blame at the foot of EU officials, saying it was "creditors [who] decided to shut down Greek banks" (the implication being that it was the bank closure and attendant economic pain which forced his hand in Brussels). Finally, the PM insists on playing up debt relief as something that was extracted from creditors during bailout talks (as opposed to something that was agreed to later once even Germany realized that without some manner of re-profiling, Greece’s situation was utterly hopeless). "We got a commitment for debt relief, which will take place after the first review of the program, in November," the PM said. 

Here are a few more notable quotes from the interview:

But for many Syriza lawmakers, the time for rhetoric has long since passed and indeed, it now appears that the party will not wait until after the third bailout is formally in place to call a party conference. Here’s Kathimerini:

SYRIZA’s central committee is due to hold an emergency meeting Thursday in an attempt to find a way to settle the growing rift within the party over whether the government should agree to a third bailout or not.

 

The second meeting Tuesday of the political secretariat in two days resulted in a decision to call a gathering of the central committee after several SYRIZA officials belonging to the party’s radical left wing called for the government not to pursue negotiations with Greece’s lenders but to follow an "alternative" path.

 

Prime Minister Alexis Tsipras spoke at Monday’s meeting of the political secretariat and insisted that the government has no other viable option than to agree a new bailout with the institutions. 

 

He proposed holding an emergency SYRIZA congress, probably in September, to allow party members to debate the issue.

 

However, the party’s Left Platform, led by ex-Energy Minister Panayiotis Lafazanis is pushing for the congress to be held now, before a third bailout has been agreed.

 

The central committee members will have to decide whether they will accept either of these options or whether there should be a ballot of SYRIZA members to decide what should be done.

Meanwhile, creditors are "pleased" with how "cooperative" Greece is being now that they have been thoroughly humiliated and subdued (which recalls what the German Economic Council said on Tuesday about "uncooperative" states). "The teams from the institutions are now already on the ground in Athens since Monday and the talks have now been ongoing for the last couple of days," an EU Commission spokesperson said on Wednesday, adding that Brussels is "satisfied with the smooth and constructive cooperation with the Greek authorities and that should allow us to progress as swiftly as possible."

But as should be abundantly clear from the above, and as we and others have pointed out on quite a few occasions since Alexis Tsipras left Brussels on July 13, there’s something very odd about leaving the implementation of an unpopular bailout program to the political party from which the staunchest opposition emanates.

The alleged plot to seize the country’s currency reserves hatched in secrecy by Lafazanis only serves to reinforce the suspicions not only of creditors, but of the very same opposition lawmakers who helped Tsipras secure the necessary votes to pass the first two sets of prior actions. 

Put simply, there seems to be a very real possibility that the Syriza rebellion will gather enough steam in the coming weeks to materially derail discussions. This is then a race - Tsipras needs to formalize the new program before Lafazanis (and perhaps Varoufakis) foment enough discontent to make a meaningful push to head off implementation.

And with that, we’ll close with the following sound bites from Kathimerini which sum up the situation quite nicely.

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