Greece Scores Another Bitter Victory

Analysis DECEMBER 16, 2015 | 18:38 GMT

STRATFOR

Editor's Note: Greece is a country in crisis. Facing financial, political and social uncertainty, Greece's ruling Syriza party has cut a deal with the European Union that should keep the Greek economy afloat at least for the time being. However, further measures to appease Athens' creditors could create political discord, if not violence, in Greece. The situation is precarious, and it is very possible that the agreement will collapse. Stratfor is logging the latest developments in this crisis update.

Late Dec. 15, the Greek Parliament approved a package of measures that will allow the country to receive 1 billion euros (about $1.1 billion) in bailout funds. The measures include legislation authorizing the sale of bad business loans from local banks to foreign investors and a new pay scale for civil servants. It was another bitter victory for the government of Prime Minister Alexis Tsipras, probably the last in a year in which the ruling Syriza party had to approve a series of controversial policies to secure funding from the country's creditors.

Tsipras did manage to preserve his thin majority, as the 153 lawmakers from the ruling party and its junior coalition partner voted in favor of the package. In addition, the reforms were not particularly controversial, and the Eurogroup will probably decide in the coming hours that Greece deserves to receive the next tranche of the bailout. But unfortunately for the Greek leader, his government will have to pass even more controversial measures in January.

The most important aspect of the Dec. 15 package is what was not included. Plans to partially privatize the national power grid operator, the Independent Power Transmission Operator, were postponed until 2016. A controversial plan to eliminate subsidies for farmers has also been repeatedly postponed since Greece first signed a bailout agreement with the Eurogroup in July, both out of fear of massive protests from a particularly noisy sector of the population and because many representatives in the legislature hail from agricultural regions.

More important, in January the Greek Parliament will have to vote on a plan to overhaul the country's pension system to cut spending by almost 2 billion euros next year. Because pensions are one of the last safety nets remaining in Greece, this is far from a minor issue. In a country where unemployment affects at least a quarter of the active population (the figures are twice as high among the youth), entire families depend on pensions from their parents or grandparents. In November, the Greek Parliament passed legislation making it easier for banks to evict families that are behind on mortgage payments. The new regulations still protect a significant number of households and will probably not be fully enforced, but they represent even further erosion of Greece's already weak safety nets.

Finally, Greece is facing an increasingly complex migration crisis. There was a significant spike in the arrival of asylum seekers from the Middle East in 2015, which forced Athens to spend extra funds to provide food and shelter for some of the migrants. For most of the year, Athens benefited from the fact that these men and women wanted to move on to Northern Europe rather than stay in Greece. The situation began to change in recent weeks, when several countries along the Balkan route started building fences and bolstering border controls to reduce the influx of immigrants. Making matters worse, Brussels forced Athens to accept a Frontex (the European Union's border agency) operation on Greece's northern border.

The European Union recently signed a deal with Turkey to prevent people from entering Greece, but the impact of the agreement has yet to be seen. Greece's main fear in the coming weeks is that people will still try to enter the country but will have a harder time leaving. This would not only increase Athens' financial burden but, more important, increase the likelihood of anti-immigrant violence in the country.

In principle, a Grexit will be less likely in 2016 than it was in 2015 because Athens is already in a bailout program and does not face a particularly pressing calendar of debt maturities. Capital controls are already in place, and parliaments in the eurozone do not have to hold any votes related to Greece. However, Greece's ruling Syriza party controls a tenuous majority of only three seats in the Parliament, meaning that even a small rebellion among the lawmakers could topple the government. In addition, because the recession, high unemployment and the immigration crisis are far from over, street protests and episodes of violence — which have been relatively rare since Syriza won the election in January — will become more frequent.