By Ellie Ismailidou, MarketWatch
Greeks will head to the polls for the third time this year on Sunday to elect a government that will lead the country as it implements the bailout deal that Prime Minister Alexis Tsipras’s left-wing government signed in August.
Greeks previously voted in the Jan. 25 election that brought the incumbent prime minister to power and the July 5 referendum, in which Greeks overwhelmingly voted against a package of austerity reforms submitted by the country’s international creditors.
After agreeing to reform measures that critics said were very similar to those rejected by the Greek people in the July referendum, Tsipras resigned and called for the election in August seeking a stronger mandate to move ahead with the reforms.
But he’s facing a rebellion from members of the left wing of Syriza, his own party, who are running under the auspices of a new anti-euro party called Popular Unity.
Here is what you need to know:
Who are the main contenders?
There are 19 parties and coalitions running in Sunday’s election, but the most important contenders are the left-wing Syriza party, led by incumbent Prime Minister Tsipras, and center-right opposition New Democracy party, led by former Defense Minister Vangelis Meimarakis.
Syriza and New Democracy have been running neck-and-neck in recent polls. But it’s important to note that no poll to date has projected more than 36% of the vote for either party — which is the minimum percentage for a parliamentary majority under Greece’s electoral system.
This means that neither party will likely be able to form a single-party government. While European Union officials have been favoring a grand coalition between Syriza and New Democracy that would guarantee the seamless implementation of the €86 billion ($97 billion) bailout, Tsipras ruled out this prospect in a televised debate Monday night.
What happens next?
If neither party gets enough votes for a single-party government — which is the most likely scenario at this point — the winner would need to form a coalition with one of the smaller parties or the country would be forced to go, as per its constitution, to yet another national election.
But Tsipras said during Monday’s televised debate that he would “seek the widest possible consensus, so that we can have a government.”
Though he ruled out a collaboration with New Democracy, he said he would be open to a “progressive” coalition, hinting at the centrist Potami and Pasok parties.
What does this mean for the Greek bailout deal?
This is the first election since Greece signed its first bailout agreement in 2010 in which neither of the two main contenders are running on an anti-bailout or anti-austerity agenda. In other words, regardless of who wins, Greece is moving forward with the implementation of its bailout agenda.
This could explain the recent drop in the yield for a key Greek bond index, which indicates investors holding the debt-laden nation’s bonds have been willing to accept increasingly lower compensation for the risk that they’re incurring, rather than demanding more as the election nears.
In October, creditors will begin a review of Greece’s progress in implementing the reforms agreed upon in the bailout. If Greece passes the evaluation, creditors have committed to begin talks on debt renegotiation.
This is vital for the future of Greece’s economy, as the International Monetary Fund deemed the country’s debt unsustainable in mid-July, saying the eurozone must commit to debt restructuring if the bailout program is to work.
