Greek Leftists Break Away From Ruling Party In Row Over Austerity

Greek Prime Minister Alexis Tsipras has announced that he will step down, paving the way for early elections following a bruising battle over austerity measures linked to a European bailout package that caused a major split in the leftist ruling party.

Syriza rebels had mutinied in three separate parliamentary votes tied to the bailout, effectively leaving Tsipras at the head of a minority coalition government.

At least 25 Syriza rebels will join the new party, named Popular Unity, as Greece launched into a bout of political horse-trading before elections expected to be held in a month’s time.

Energy Minister Panos Skourletis, a close Tsipras adviser, said he thinks the government must move quickly to resolve the rift within Syriza over the third bailout.

Greek Prime Minister Alexis Tsipras, left, speaks with Greek President Prokopis Pavlopoulos, during their meeting in Athens, Thursday, August 20, 2015.

Moody’s credit rating agency warned in a statement that the snap elections “could elevate programme implementation concerns” and potentially put further instalments of the bailout package at risk.

The government on Thursday cleared 3.4 billion euros owed to the European Central Bank, the ECB confirmed, marking an urgently needed truce in a row that saw Greek banks shuttered, the economy battered and nearly saw Greece thrown out of the eurozone.

If they fail, the president must organise early elections.

However, it is unlikely that Meimarakis or the new party will be able to form a government.

If he fails, a caretaker government will be appointed to lead the country until the new elections.

“We did not secure the agreement we wanted but it was the best we could do under the circumstances”, Tsipras said in a nationally televised address Thursday evening.

The deal, however, came with strict terms for more spending cuts and tax increases. About one in four Syriza lawmakers refused to back the bailout’s ratification in Parliament last week, which was only approved with backing from opposition parties.

Berlin insisted it expects Athens to implement the reforms agreed under the bailout deal, saying Tsipras’s resignation has not changed anything.

However, he said, “the downside of new elections is that they will slow the implementation of measures”.

“Popular Unity proposes scrapping Greece’s bailout agreement and opposes repaying the majority of Greece’s debt, Mr. Lafazanis said”.

The political uncertainty nevertheless took its toll on Greece’s stock market, with the main stock index closing down 2.5 percent, a day after losing 3.5 percent on election speculation.

Here is a look at what comes next for Greece and what the elections mean for the bailout, the 86 billion euro ($95 billion) package of loans that is keeping the country solvent and part of Europe’s joint currency, the euro. “Now that this hard cycle has ended…” Missing the payment would have raised new questions about the country’s ability to remain in the euro. He is betting on a stronger mandate if polls are held before voters feel the impact of the new steep tax hikes and spending cuts.