Begone, Rebels

As we noted last week, a surprisingly large number of Syriza MPs voted against the bailout package, thereby defying their own government. The rebel faction was led by Marxist hardliner and energy minister Panagiotis Lafazanis, who has always been on record for being in favor of a “Grexit”.

After the vote, Lafazanis told journalists that he “was against the plan”, but “supported the government”. This didn’t save him however – Tsirpas reshuffled his cabinet, removing Lafazanis and two deputy ministers, replacing them with more loyal allies.

 

1000Grexit supporter Panagiotis Lafazanis got “exited” himself.

Photo credit: Thanassis Stavrakis / AP

 

As Reuters reports:

 

“Greek Prime Minister Alexis Tsipras sacked left-wing Energy Minister Panagiotis Lafazanis and two deputy ministers on Friday as he reshuffled his cabinet following a party revolt against a tough new bailout deal adopted this week.

The 40 year-old prime minister moved to clear out the rebels after 39 Syriza hardline lawmakers refused to back the government over the measures, which were demanded by European partners as a pre-condition for beginning talks over a new bailout.

The main economic ministries remain unchanged, with Euclid Tsakalotos remaining in place at the finance ministry and George Stathakis staying at the economy ministry.

But Labor Minister Panos Skourletis, one of Tsipras’ closest allies, will replace Lafazanis in the key energy portfolio, where he will be responsible for sensitive privatization dossiers. Administrative Reforms Minister George Katrougalos will take over at the labor ministry.

The reshuffle had been expected ever since the party rebellion left Tsipras dependent on the votes of pro-European opposition parties to pass the bailout deal but it is not likely to change the uncertain overall outlook for the government.

Alongside Lafazanis, leader of Syriza’s Left Platform, a faction that was bitterly opposed to the bailout, Deputy Labor Minister Dimtris Stratoulis and Deputy Defense Minister Costas Isychos also lost their jobs.

Stratoulis was replaced by Pavlos Chaikalis, a former comic actor from Syriza’s right-wing coalition partners, the Independent Greeks, in a slightly reworked portfolio.

Former Deputy Finance Minister Nadia Valavani, another bailout opponent who resigned earlier this week before the vote, was replaced by Tryfon Alexiadis, a leading member of Greece’s tax experts’ union.

Christoforos Vernardakis, an academic, will become deputy defense minister, while Syriza lawmaker Olga Gerovasili was named government spokeswoman.

 

Given that 39 of Syriza’s 149 MPs voted against the deal, early elections are widely held to be likely. After all, it must be expected that the rebel faction will continue to defy Tsipras, who seems intent on implementing the deal. This should in principle be no problem, as he can probably continue to rely on opposition support.

 

500px-Anticommunist_Logo.svgIt could also be that the rebellion simmers down again. After all, MP is a fairly cushy job in economically challenged Greece. Once people get a taste of political power and the perks that usually come with it, they often become conveniently forgetful about their principles.

 

However, we do at the moment believe that an early election – probably after all the most urgent reforms have been set into motion – is the most likely outcome. This will be quite interesting, as support for Syriza has actually soared in spite of the government deciding to ignore the referendum outcome. Whether that support will persist at recent levels is however an open question. Moreover, it cannot be ruled out that Syriza will actually split in two, with the hard left faction led by Lafazanis forming its own party.

 

Greece’s new ministers are sworn in

 

The Greek Stock Market Recovers – Sort Of

The stock market in Athens seems to like the fact that Grexit was avoided for the time being, but its celebration is so far oddly subdued. We believe the main reason for this is the growing danger of a “bail-in” of shareholders and creditors of Greek banks, which are widely no longer considered solvent after the events of recent months.

Views on this particular topic are actually divided, but at least one of the larger banks is reportedly in serious trouble. In any case, non-performing loans in the Greek banking system have recently streaked to a new record high, in parallel with the run on deposits. So the banks are certainly not healthy, in spite of having been recapitalized at great cost late last year and remaining in the ECB’s good graces for now.

 

ATGThe Athens General Index bounces back – but the bounce seems a bit subdued so far, although it was actually a large move in percentage terms, via BigCharts, click to enlarge.

 

This makes a bit more tricky to play Greece via ETFs or similar index-tracker vehicles, all of which are certain to contain bank stocks as well. To be safe, one should probably wait for the upcoming verdict on the banking system situation, which is bound to become known soon.

 

Conclusion

We seem to have come full circle. Readers may recall that we once speculated that the differences between the euro-group and the Syriza government may just be an example of Kabuki theater (see “Greece and the EU – Nothing but Political Theater?”. We later dismissed the idea again, as it appeared that the two sides were serious in their intransigence. Now we’re not so sure anymore.

One thing has become clear though: Tsipras did not secretly sympathize with the Marxist wing after all. For some time we were unsure where he actually stood on the leftist spectrum (which is a broad one in Syriza’s case), as he never really declared himself in this respect, at least not to our knowledge. Now it seems likely that he is closer to the center than the far left. Whether he and Syriza will survive the new course politically remains to be seen, but for the moment the party still enjoys a surprising amount of electoral support, if recent polls can be believed.

 

 

 

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