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Greek PM Tsipras Has 3 Options to Follow to Unlock Aid, says Bloomberg

tsipras_skefGreek Prime Minister Alexis Tsipras faces a “potential bombshell” with the additional austerity measures creditors demand and there are three scenarios on how he will act, according to a Bloomberg analysis.
The disagreement between the International Monetary Fund and European creditors — the European Commission, European Stability Mechanism and European Central Bank — over the 2018 fiscal targets for Greece has led to the need of contingency measures worth 3.6 billion euros.
This brings Tsipras and Finance Minister Euclid Tsakalotos to the delicate position of having to convince junior coalition partner Independent Greeks (ANEL) and several SYRIZA MPs who have started showing their frustration with the harsh measures, to continue supporting the government program and vote for the new measures.

According to the Bloomberg analysis, Tsipras has three options:

Option 1: The Bitter Pill
It wouldn’t be the first time that Tsipras capitulates. Facing the risk of the Greek economy collapsing and Greece’s exit from the euro area last July, he abandoned his campaign vow to roll back austerity by accepting creditors’ demands in exchange for a new bailout program.
With opinion polls now showing a clear lead for the main opposition New Democracy party and fund reserves running low, Tsipras may decide he has no option other than to follow that path again. The 41-year-old leader could try to convince MPs and voters that the new measures will also bring the much-needed debt relief he has promised.
Tsipras may also argue that, since the contingency austerity measures would be enacted only if Greece misses its budget targets, this part of the package is harmless. The less detailed these additional measures are, the more room Tsipras and Tsakalotos will have to communicate the message that it’s just a backup with no meaningful impact.
Ruling-party lawmakers faced with the prospect of losing their jobs if elections are called, will be tempted to bite the austerity bullet again. After that, they don’t have to face their voters until 2019.
Market reaction to the outline deal that Tsipras has been offered by creditors is so far sanguine, signaling that investors regard this as the likeliest scenario. German Finance Minister Wolfgang Schaeuble said Monday the review of Greece’s aid program will be completed ” in the end.”
If Tsipras agrees to the contingency measures, euro-area finance ministers could meet April 28 to recommend making a payment.
Option 2: Snap Elections
Failure to reach an agreement, or convince governing lawmakers about its benefits, could force Tsipras to dissolve parliament and ask voters to decide. That’s a card he played last year, when party dissenters revolted against the decision to accept creditor demands and stripped him of his majority.
Tsipras emerged stronger from that tussle while the hard leftists of SYRIZA that abandoned him failed to win any seats in September’s snap vote. He may struggle to repeat that trick.
Last summer, Tsipras found support from pro-European opposition parties to get the tough measures attached to the aid program through parliament. But this time opposition forces have said they won’t support a Tsipras-led government.
Opinion polls, which have often proved wrong in Greece, show that the main opposition conservative New Democracy has regained the lead after more than two years.
A New Democracy victory would probably lead to a coalition with moderate parties committed to keeping Greece in the euro or produce a national unity government. The question in that scenario, as in 2012, is whether it would be dangerously late to get Greece’s bailout back on track again after the political drift of election campaigning and the negotiations to form a coalition.
A hung parliament leading to prolonged instability, or a Tsipras victory on an anti-more-austerity ticket, are also possibilities. Either of those outcomes could put Greece on the path toward default in July and expulsion from the euro some time afterward.
Option 3: Referendum
Tsipras could claim that the creditors are demanding more than was agreed under the bailout and he needs a new mandate to implement the measures, much as he argued before last July’s shock plebiscite. A poll published earlier this month suggested that Greeks would vote against more austerity, as they did last year, putting the country’s place in the euro zone in doubt again.
Greece’s pro-European opposition parties could ask voters to abstain in an effort to discredit Tsipras’s referendum while reducing the risk of a negative vote. If turnout ended up being low, Tsipras’s position could become untenable. Still, a referendum would give him more wiggle room to spin the result than an election, the Bloomberg analysis concludes.

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