Friday, 14 September 2007

Will politics unseat reform?

WHAT was most surprising in a debate among party leaders a week before the election was not the readiness with which the opposition attacked the government. That has been going on for months. Rather, it was the viciousness of the knife fights among the small parties. For the first time in many years they sense a real opportunity to become coalition partners, either with conservative New Democracy or with socialist Pasok. Accordingly, each of them fought hard to explain why they were the right flavouring for the stew.

Alekos Alavanos of the Left Coalition claims that his party either anticipated or cultivated majority positions on education (no private universities, thank you), the environment (protection, please) and the separation of church and state (sooner rather than later). 

George Karatzaferis of the Popular Orthodox Rally (LAOS) says that as coalition partner he would guarantee the transparency New Democracy cannot deliver alone ("One-party governments are the nursery of corruption"). As a new party, he won 2.19 percent in 2004 and needs 100,000 votes to enter parliament, something that is widely expected to happen on Sunday.

"It is we who changed the rules of the game," he said. "We no longer ask which [party] will come first, but whether they will win a majority of seats."

In its attempt to cut Karatzaferis down, New Democracy has encouraged the entry into the race of Stelios Papathemelis, a former Pasok minister with similar nationalist and religious leanings to Karatzaferis.
There is a hidden danger, however, to the small parties in this looming possibility of a coalition ¬ that they may bleed votes to their intended partners. Many voters may simply not see the point in punishing one of the major parties only to see it swallow their vote in a merger. Recognising this danger, Alavanos has vehemently denied any engagement to George Papandreou, who has correspondingly sung ever louder under his balcony.

The mistress of the game when it comes to self-sufficiency, though, is the Communist Party of Greece (KKE) general secretary, Aleka Papariga. As far as she is concerned, New Democracy and Pasok club each other over the head to establish an artificial ideological difference and fool the electorate into making a false choice. Only when this sham of a democracy ends can socialism truly bring about social change, she says, so coalitions are out of the question.

It goes without saying that she crucifies Alavanos for playing into the system and even accepting the authority of the European Union, an instrument of imperialist capitalism. As the more endangered of the two communist parties in parliament (3.26 percent of the vote to Papariga's 5.9 in the last election), and as the rump of a brief experiment in left ecumenicity, Alavanos insists on leaving the door open to collaboration. But it is a rabbit's courtship of a cat.

The other problem with the coalition scenario is that Prime Minister Costas Karamanlis has now officially rejected working with Karatzaferis in unequivocal terms: "We cannot work with Mr Karatzaferis' party because we do not collaborate with extremes. If a parliament emerges where there is no absolute majority, it's more or less understood that we will go to new elections."

For that to happen, the second-largest party in parliament must also prove unable to form a coalition government with at least 151 seats in the 300-seat legislature. So Karamanlis is gambling that if he comes in a weak first, voters will strengthen him in a second contest as they did the last conservative prime minister in 1989.

Greece's two-party system has successfully occupied the middle ground since 1974. Only on the right and left margins of the spectrum have independents popped up. All of them have been splinters of Pasok (Dikki, Aske, Democratic Rebirth), New Democracy (Democratic Renewal, Political Spring, Free Citizens' Movement, LAOS) or, most entertainingly, the KKE (see article on pages 6-7). All have hitherto failed to challenge the majors, even when they made it into parliament.

The depressing thing about this election is that politicians have refused to discuss the issues that will preoccupy them in the next term. Asked how he would rescue social security, Papandreou said that he will not reduce pensions, or raise the retirement age or contributions. In fact, he said, he will raise farmers' pensions. "Money is not the problem. It's the political choices," he said.

Asked about his tax policy, he said he would narrow the gap between direct and indirect taxes. To the optimist, that means a lowering of VAT, hiked in a tax-collecting crisis to 19 percent by New Democracy; to the pessimist, it means raising personal income tax, lowered by New Democracy. Joining the dots, Papandreou could be apt to re-enact some of his father's tax-and-spend policies, which Greece can ill afford to do. Surrounded as it is by tax havens and cheap labour in Bulgaria, Albania and Fyrom, Greece really needs to boost its weak-kneed business development.

Karamanlis has been equally opaque about how he will tackle reform in a second term. He has talked about opening the way to private universities through a constitutional amendment, but hasn't explained how he would achieve a two-thirds majority in parliament. He still wants to reform public administration, but at the rate at which he chipped away at bureaucracy in his first term it would take him longer than another four years to revolutionise the state. Neither he nor anyone else has even talked about slimming the bloated civil service. Like his opponent, he has not explained how he will save social security without touching the retirement age or lowering pensions.

The smaller parties are even more vague. Asked about his economic policy, Karatzaferis talked about "making the pie bigger" and tempering soaring bank profits. Asked about the effect on competitiveness of raising salaries, Papariga talked about capital flight. Asked about his view of the economy, Papathemelis attacked employers for whipping more performance out of their employees.

No one expects politicians to roll out supply and demand charts, but they do have to be credible as well as have their heart in the right place.

The most charitable explanation to the policy vacuum is that New Democracy is banking on its strengths. It has tamed the budget deficit and lowered the national debt; it has brought unemployment to below eight percent; it lowered company and personal tax, made good on a promise to raise pensions and has begun to encourage entrepreneurship (see the last of our economic policy surveys in the centrefold). In terms of reform, it has begun to make higher education accountable and abolished tenure in state companies.

At the same time, Pasok is surely relying on the conservatives' sizeable liabilities: Its attempt to cover up a massive espionage operation, its failure to bring about a revolution in transparency, epitomised by the sale of an overpriced government bond to pension funds. Pasok also considers education reform a Pyrrhic victory.
Ordinarily, one's loss would be the other's gain; but the parties of the left expect to rake in a protest vote against the cynicism of both major parties this year, and the entry of Karatzaferis as a possible fifth party is a wild card. Those two factors are enough to make Karamanlis and Papandreou nervous.

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