Against its will, Greece approves austerity. Analysts now predict Tsipras' cabinet reshuffle
Violent clashes broke out while the Greek parliament was voting on wide-reaching reforms that are a condition of a third bailout from creditors.
Late Wednesday, the
austerity bill that will pave the way for financial aid worth 86 billion
euros was approved with 229 votes in the 300-seat
chamber. There were 64 votes against it and six abstentions.
Despite backing from the pro-European parties, Prime Minister Alexis Tsipras lost the support of a quarter of Syriza party members of parliament.
39 members from Tsipras' own party voted against the bailout plan, which requires vast spending cuts, pension reforms and tax
rises. Those included former finance minister Yanis Varoufakis, the energy
minister and deputy labor minister. Deputy Finance Minister Nadia
Valavani resigned ahead of the vote.
Analysts now predict the cabinet reshuffle to lie ahead for Tsipras.
Jasper Lawler, market analyst at CMC Markets wrote in a note:
"PM Tsipras will try a cabinet reshuffle, but if that fails to sure up confidence in Syriza, a worst case scenario would be snap elections."
Former Greek finance minister Gikas Hardouvelis shared this view saying that Tsipras has lost a quarter of his MPs, and reshuffling of the government would be a minimum thing to do. If he wants to stay in power, it is important to make sure "that his ministers do believe in the reforms and work hard and push. He cannot afford to have people in the ministries that are against what has been decided now."
"Opening up professions, fighting oligopolies, fixing the public sector, justice sector and tax system - all these things give power to the people," he said. "If he is a part of that and he does do reforms, he will succeed. But if he does not…he will be gone from the political scene. It's up to him at this point."
Hardouvelis added that snap elections could be held in September or October.
The approval of the bailout conditions by the Greek parliament will hopefully pave the way for Greece to access European Union funds via the European Financial Stabilization Mechanism (EFSM) - a short-term financing solution. This has, however, caused worries among non-euro-zone countries like the U.K., which is afraid its taxpayers will end up funding part of Greece's bailout.
The question of Greece's debt is still disturbing, though the country's short-term financing will likely be approved.
The country has already missed two payments worth a total of 2 billion euros to the International Monetary Fund (IMF).
Indeed, the IMF caused a stir ahead of the vote
calling for Greek debt writedown, although Germany has not been in favor of debt forgiveness, arguing that
it could set precedence for other indebted members of the single
currency bloc.
However, as Reuters reported, earlier Thursday German Finance Minister Wolfgang Schaeuble said that a solution to Greece's problems without reducing a debt would be tough.
He also noted that such a move would be incompatible with the country's membership in the euro, meaning that a temporary exit from the single currency "would perhaps be the better way."
