What the snap elections mean for Greece

published 21 August 2015

12-8-21-Tsipras-634 — Is Alexis Tsipras guilty of cynical timing?

New Greek elections have been scheduled for 20 September. What does this mean for Greece and the future of the single currency?

So what's happened?

Tsirpras hopes that the results will give him a renewed mandate to implement the reforms and spending cuts agreed as part of the bailout. In a related move, 25 MPs from the ruling party, Syriza, have left to form their own anti-bailout party, Laiki Enotita (Popular Unity). This party will be lead by former energy minister Panagiotis Lafazanis.

What is the most likely outcome?

The only positive for Tsipras is that the new movement doesn't contain more well-known opponents of austerity such asformer finance minister Yanis Varoufakisor parliamentary speaker Zoe Konstantopoulou. Ian Forrester of The Share Centre thinks that the new government "may be more left-wing and opposed to the reforms and austerity measures agreed in the bailout deal".

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Will this affect the reforms?

In recent years there has been a tendency for Greeks to postpone paying their taxes in the run-up to an election. This is because they are eager to hang onto their money until they are certain who is going to be in power. The Slovakian finance minister has also criticised the "cynical timing" of the announcement, which comes almost immediately after Athens received the first part of the bailout money.

Does this mean that the deal couldunravel?

After all, the fact that Greece joined the euro, let alone stayed in it for so long, is evidence that decisions aren't been taken in strict accordance of economic logic. Perhaps the only thing we can say is that, as Jennifer McKeown of Capital Economics puts it, "the threat of Grexit has far from evaporated".

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri