Greece's Tsipras narrowly wins a confidence vote, but risks early election

  • "It's highly likely" that there will be an early election in Greece, Mujtaba Rahman, managing director at Eurasia Group told CNBC on Thursday.
  • "This will make completing the current parliamentary term in office a near-impossible job," Wolfango Piccoli, co-president of Teneo Intelligence said in a note.

Prime Minister Alexis Tsipras has narrowly won a confidence vote on Wednesday night, averting a snap elections. However, the stability of his government could be at risk.

Tsipras' government won the vote with 151 lawmakers, out of 300, supporting him. The Greek government was thrown into this uncertainty after its coalition partner resigned last week over a naming deal with Macedonia.

But the political situation is still fragile for Tsipras, whose party has only 145 seats in the Greek parliament — making him leader of a minority government.

"It's highly likely" that there will be an early election in Greece, Mujtaba Rahman, managing director at Eurasia Group told CNBC on Thursday.

Tsipras' mandate ends in September, but the fact that he now heads a minority government has raised questions about whether he will be able to survive the leadership until then.

"This will make completing the current parliamentary term in office a near-impossible job," Wolfango Piccoli, co-president of Teneo Intelligence said in a note.

"However, Tsipras will have the advantage of determining the timing of the next vote and approve legislation he deems to be 'vital'," Piccoli also said.

Milos Bicanski | AFP | Getty Images

Greece ended its third bailout program in August last year – after nearly 10 years of external financial help. Prime Minister Tsipras has claimed that this moment was a turning point for the economy. He has since then promised to relax some of the austerity measures, including raising the minimum wage.

Maartje Wijffelaars, economist at Rabobank, told CNBC earlier this week that she expects Tsipras "to first try to pass policy covering these benefits and tax changes before calling new elections."

Syriza, Tsipras' leftist party, has only been placing second in opinion polls over the last months. In the most recent polling, out last month, there was a 10-percentage point difference from its opposition party New Democracy.

The leader of the conservative party, Kyriakos Mitsotakis, said Wednesday night in parliament that an early election would bring stability to the economy and certainty for businesses and citizens.

What's the next big moment for Tsipras?

Greek lawmakers have been at odds regarding the deal that the Prime Minister struck with Macedonia.

Athens has been of the opinion that Macedonia could have territorial claims over a province in Greece with the same name. The topic is highly sensitive in the country.

Under Tsipras agreement, Macedonia will be called Republic of North Macedonia. As a result, Greece would lift its objections to its neighbour joining organizations like NATO and the EU. Macedonia's Parliament approved a constitutional amendment to change the country's name at the weekend.

Greek Prime Minister Alexis Tsipras gets out his car as he arrives at the European Council in Brussels on October 18, 2018.
FRANCOIS WALSCHAERTS | AFP | Getty Images
Greek Prime Minister Alexis Tsipras gets out his car as he arrives at the European Council in Brussels on October 18, 2018.

The Greek parliament is expected to vote on this deal next week.

"If not passed with 151 votes it could create significant political issue to the government," investment bank Axia Ventures said in a research note on Thursday.

"Although the government does not need to pass the agreement with an absolute majority (151 votes), if not, it will be considered a significant political defeat that will weaken its stance and could accelerate the decision of the prime minister for early elections," the bank also said.

A 'lost year' for Greece

Because of the political situation, analysts do not expect any big changes in Greece in the coming months.

Research company Teneo said that "beyond Tsipras' efforts to shore up popular support for Syriza, however, not much would get done."

Mujtaba Rahman, managing director at Eurasia Group, also said the ongoing political battles are set to continue as every party tries to gather more support ahead of the elections.

"The political upheaval of the last few weeks - on full display in the tense clash between Tsipras and Mitsotakis during the debate that preceded the vote - gives us all a taste of how the next few months will play out ahead of elections, as both sides try to rally their voters," he said.