Just when you thought Greece had quietened down for a bit, there's a snap election called by Prime Minister Alexis Tsipras on Thursday.
Greece is becoming near-Italian in the frequency of its elections. Why is this one being called and why is it so important? We explain below.
From the announcement of the election, the largest Greek opposition parties have up to three days to try and put a coalition government together -- unlikely with Syriza being by far the biggest party. Until the election, expected on September 20, a caretaker government will be put in place, led by Vassiliki Thanou-Christophilou, the president of Greece's supreme court and a vocal bailout opponent.
He has a "moral obligation" to – at least that's what he said Thursday when announcing the move. More prosaically, he has compromised beyond what was promised during his last election campaign in negotiations with Greece's international creditors for a desperately needed third bailout, he is facing rebellion from within his own party, and he needs a new mandate from voters to maintain credibility and keep governing.
The furthest left-wing of Tsipras' party, which has been instrumental in leading the discontent with recent compromises, has announced that it will break away to form Popular Unity . Despite this, Syriza at the moment looks like the party to beat.
So far, so good. Jeroen Dijsselbloem, president of the Eurogroup of euro zone finance ministers, said in a statement Thursday that he hopes the elections will lead to even more support in the new Greek parliament for the new bailout program. However, if the election means that reforms demanded as part of the bailout are put at risk, they may change their tune.
Recent events have shown two important factors for this election: Tsipras' personal popularity and that the vast majority of Greeks still want to keep the euro as their currency. The assumption that Tsipras should get into power again, with a strengthened hand in delivering on promised reforms, has barely moved the euro. The Athens stock market followed the rest of Europe into negative territory Friday but, in percentage terms, the fall was no greater than the larger bourses.
However, this might still be "another staging post towards a voluntary departure from the euro", as Simon French, chief economist at Panmure Gordon, wrote in a research note Friday.
Even if re-elected. Syriza may still struggle to implement the conditions of its new bailout, if Greece's recession and the impact on its people continues. The build-up to the election should stall the major reforms demanded by its creditors – which could ultimately mean that Greece fails its first bailout review in October. If this is the case, expect Grexit headlines to start appearing once more.