Monday 24 October 2016

Greece crisis: Fresh bailout fears after premier Alexis Tsipras resigns

Published 21/08/2015 | 10:25

Alexis Tsipras has announced his governments resignation and called early elections (AP)
Alexis Tsipras has announced his governments resignation and called early elections (AP)

Greece's €86bn bailout is facing fresh doubts after the resignation of prime minister Alexis Tsipras plunged the country into new political uncertainty.

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The widely expected move is likely to mean elections next month, but there are fears it could slow progress on controversial reforms agreed by the debt-laden country with creditors as part of the rescue.

It came as Greece received its first €13bn payment as part of the package, following a hard-won agreement that will lead to a tough programme of spending cuts and tax rises.

Moody's credit rating agency warned in a statement that the snap elections "could elevate programme implementation concerns" and potentially put further instalments of the bailout package at risk.

Mr Tsipras's move came after he agreed to tough conditions laid down by Greece's creditors, reversing initial opposition after his Syriza party was swept to power on an anti-austerity platform subsequently backed by the public in a referendum.

His volte-face has split the party and the elections will mean more short-term uncertainty. But if, as expected, he wins the poll he may be able to lead a more stable government and neutralise critics on the left.

ING Bank's Paolo Pizzoli said Mr Tsipras was deliberately challenging opponents within Syriza, adding that should he fail to win an outright majority, any coalition would be likely to have a pro-bailout stance.

This would make Greece's reform plans "a bit more credible".

Mr Pizzoli added: "Some short-term disruption seems unavoidable.

"Under the rule of the caretaker government, which will lead Greece until the polling date, the implementation of the reforms approved by the Greek parliament will almost inevitably be delayed."

Analysts at Societe Generale said the latest development could prevent the passing of bailout-related legislation - including pension reform and spending measures - until after the elections.

Greece is worth £1 billion a year as an export market for the UK, representing 0.3% of overseas sales.

But it is the wider repercussions of uncertainty on the eurozone that will cause most anxiety for British companies as well as investment funds including pensions.

The single currency bloc is the UK's biggest trading partner.

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