Euro zone expects Greece to reform despite election

European policymakers said on Friday they expected Greece to press on with reforms agreed under its new bailout regardless of Prime Minister Alexis Tsipras’ decision to resign and seek new elections.

Some investors, however, were concerned by the uncertainty surrounding new elections.

Tsipras resigned on Thursday, hoping to strengthen his hold on power in snap elections after seven months in office in which he fought Greece’s creditors for a better bailout deal but had to cave in.

Greece received the first tranche of funds from the new 86-billion-euro (.01 billion) bailout on Thursday, after which Tsipras quit to seek re-election.

“We respect Mr. Tsipras decision, but I can’t help feeling it’s a bit cynical timing to do it immediately after the first disbursement,” Slovak Finance Minister Peter Kazimir tweeted.

“Nevertheless, we have to believe that any Greek government to come will implement what was agreed,” he added.

In Brussels, the European Commission said it was not worried about the implementation of the Greek bailout program, under which Athens must carry out economic reforms in return for aid.

“Regardless of elections, reforms can be implemented,” a Commission spokeswoman said.

In Berlin, the government said it expected Athens to press ahead with its reform agenda and the finance ministry said aid disbursements would be delayed should the elections cause any delay in an examination of the program.

In Paris, the foreign ministry said the French government was determined to work with the future Greek government on the implementation of the bailout program.

CLEARER MANDATE

Thomas Wieser, the head of the Euro Working Group which prepares decisions for meetings of euro zone finance ministers,

took a sanguine view of Tsipras’ election gambit.

“This was really an expected step and for many people a desired step to get to a clearer structure in the Greek government,” he told Austrian broadcaster ORF.

Many investors, nonetheless, played safe. German Bund yields fell as the prospect of snap elections in Greece increased demand for safe-haven assets, which were also buoyed by concerns about a deepening economic slowdown in China.

Muddying the political picture in Greece, however, a parliament deputy speaker announced on Friday that far-left rebels in Syriza had broken away to form a new party with 25 lawmakers. There were also expected to be delays as other parties were asked constitutionally if they could form a government.

Athens faces a review of reforms it is required to make under the package in October.

Finnish Finance Minister Alexander Stubb said he did not believe that Tsipras’ resignation would have an impact on the execution of the new loan program.

“An optimist would of course think that a wider coalition and better support for the bailout package would come out,” he told Helsingin Sanomat newspaper .

In Germany, where parliament voted in favor of a third Greek bailout on Wednesday despite a rebellion among Chancellor Angela Merkel’s own allies, conservative lawmaker Hans Michelbach said Tsipras was damaging his own country.

“He is again creating insecurities where a consistent and far-reaching reform path would be recommended,” said Michelbach, who voted against the bailout on Wednesday. “This will set Greece back again.”

Christian Lenk, strategist at DZ Bank, said Tsipras’ resignation was a double-edged sword.

“In the short-term it creates a lot of uncertainty, it will cause a delay in the reforms demanded by the memorandum of understanding,” he said.

“However, looking at the latest polls we see Syriza very strongly leading among the Greek parties,” he added. “We see quite a strong win and the new government should be way more stable than the older one and this should dampen implementation risk in the longer term.”