The early estivation of parliament cornered media attention for much of last week, but thanks to a cunningly timed decision on the government's part the spotlight quickly drifted to Europarliamentary elections. This is a time for political correspondents to read party favour or exile into Brussels appointments, so the executive-bashing is quietly retired until after June 7.
Critics have raked the Karamanlis government over hot coals for depriving prosecutors of a final opportunity to bring cases against ministers for the 2004-7 period. The constitution gives parliament alone prosecutorial powers against ministers and deputy ministers, but it sets a statute of limitations. Any crimes committed before the last election have to be prosecuted within two parliamentary sessions of the current term of office.
Parliamentary sessions normally run from the mandatory first Monday in October to mid-June, when a full session of parliament votes to enact the summer skeleton parliament consisting of one third of its members in rotation. That summer parliament doesn't have the full parliament's prosecutorial powers, so Pasok had requested that the current session be extended until September, giving the judiciary an extra three months to bring possible cases in the Vatopaidi land exchange, backhanders from Siemens, government bonds issued in 2006 and the sale of Germanos to OTE.
Those four investigations will still continue, but they may no longer indict the two ranks of minister and deputy minister set aside in the constitution as politically answerable figures.
New Democracy's growing fatigue at these investigations was apparent. Pasok was unlikely to get its extension until September, but the government's move still practically removed four weeks of regular work.
The government may have won a practical victory. It has protected its top cadres from prosecution in outstanding investigations. But the damage to the system goes beyond an early closure of parliament. The underfunded and lumbering wheels of Greek justice would have likely failed to act within statutory limits. The bond investigation, for example, was launched in March 2007. It is the growing demoralisation surrounding the political system that will be the real price we pay. The court of public opinion has already ruled in poll numbers.
What will matter in a more practical sense over the next five months is the economy. Greece is due to submit a renewed Stability and Growth programme to the European Commission in mid-September explaining how it will bring borrowing to below three percent of GDP next year and eliminate borrowing over four years.
Never before has Greece been under such pressure to achieve fiscal discipline, leading to real hope that it just might. Former finance minister Yiorgos Alogoskoufis already brought borrowing down from a revised 7.5 percent of GDP in 2004 to what would have been 3.7 percent last year. Autumn spending to stave off the crisis raised that to five percent, and the commission expects it to go higher this year.
Is Greece listening to outside advice? To some extent, yes. In the first week of February, Papathanasiou said the government would save by hiring below attrition and offer the civil service an inflationary raise. After the commission intimated the insufficiency of this, Prime Minister Kostas Karamanlis announced a public hiring freeze, a ten percent cut in discretionary ministry spending and the merging or abolition of 1,000 state enterprises over four months.
Brussels still wasn't satisfied. The following month it suggested a civil service salary freeze, deeper ministry spending cuts, improved tax collection and reform of social security and healthcare. Karamanlis obliged on the salary freeze and Papathanasiou made noises about improving tax collection; but he ultimately resorted to new taxes. People declaring above 60,000 euros in earnings would pay one-off levies of between 1,000 and 5,000 euros.
Not only was this a dent in the government's straight record of tax reduction (his predecessor briefly removed a tax-free threshold on the self-employed, was removed in turn and the measure put on ice for a year); it was an indirect admission that improvement of tax collection is a longterm project that cannot save this year's budget.
Nonetheless, given the poor dynamics of the Greek economy and the populist leftism of Greek politics that have helped keep it an uncompetitive handout culture since the 1980s, the government has shown some willingness to listen to Brussels.
Some good news may be around the corner. Economic sentiment has been falling for two years. An index compiled by the Foundation of Economic and Industrial Research (IOBE) went from 108.4 in 2007 to 47.2 in February. But it rose slightly in March to the low 50s, signalling a possible sign of recovery.
The foundation will announce next month that while Papathanasiou's estimate of 1.1 percent growth this year may be optimistic, the commission's 0.2 percent estimate is probably pessimistic and the result is likely to be close to the ministry's worst case scenario of 0.5 percent on the back of consumer spending. This against an expected 1.9 percent shrinkage in the eurozone is a small coup.
Nonetheless, as Greece's central banker, Yiorgos Provopoulos, said in his annual report, bringing down the debt is a sine qua non for the Greek economy. Whatever windfalls Papathanasiou may receive, he will be judged by the discipline and accuracy of what he presents in September.