Greece debt crisis: PM Alexis Tsipras faces Syriza mutiny after capitulating to demands

As was said just yesterday.

 

Prime Minister Alexis Tsipras returned to face a mutiny within his coalition after he surrendered to European demands for action to qualify for up to 86 billion euros ($127.8 billion) of aid Greece needs to stay in the euro.

With two factions in his government already saying they won’t support the deal, Tsipras met with his closest aides as he tries to stop the revolt from spreading before a vote in parliament on Wednesday. Creditors’ demands include an overhaul of sales tax, a broadening of the tax base and a clampdown on pension costs.

Tsipras will “have to change his administration and clear out hardliners and radicals from his party,” as well as rely on opposition support to pass the necessary measures, said Eurasia Group analysts Mujtaba Rahman and Federico Santi. “But it is a tough call to determine how Tsipras will go about doing this.”

Greece Capitulates: Tsipras Crosses “Red Line”, Will Accept Bailout Extension

We’ve long said that negotiations between Greece and its creditors are more a matter of politics than they are a matter of economics or finance.

From the troika’s perspective, breaking Greece and forcing PM Alexis Tsipras to concede to pension cuts and a VAT hike is paramount, and not necessarily because anyone believes these measures will put the perpetually indebted periphery country on a sustainable fiscal path, but because of the message such concessions would send to Syriza sympathizers in Spain and Portugal. In short, the troika cannot set a precedent of allowing debtor nations to obtain austerity concessions by threatening to expose the euro as dissoluble.