Wednesday, 22 June 2011

The Day Greece Stood Still

Standing up is a gesture of pride, of hope and of defiance. The popular movement that stood outside parliament last Wednesday, June 15, defying the government to put away its 28bn euro austerity package, stirred a number of ruling party MPs to stand up to their government and refuse to vote the package into law. The result was that that government momentarily faltered, and nearly toppled. Prime Minister George Papandreou offered his resignation to conservative opposition leader Antonis Samaras in return for a grand coalition, only to retract it, we are told by Samaras, following outrage from his party seniors.

There followed the thriller of the reshuffle the following day, disappointing in its failure to include not only the conservative opposition, but also independent politicians with broad authority such as Dora Bakoyannis and Fotis Kouvelis. Even though this reshuffle was largely a game of musical chairs, keeping power strictly within Pasok, it did bring two important changes. In came Evangelos Venizelos, a politician with the broad appeal in the party base that Yiorgos Papakonstantinou lacked, and out went ministers who were quietly (Tina Birbili-Environment and energy) or vocally (Louka Katseli-Employment and Social Security) resisting public sector reform.

The vote of confidence in the small hours of June 22 represented a psychological turnaround for the government. Until now it had been isolated as the only party supporting the terms of the May 2010 memorandum with Greece's troika of creditors, the ECB, EU and IMF. After a highly polarised parliamentary debate that stretched the limits of polite confrontation, it is the opposition that has begun to appear isolated in its refusal to join the government in a national coalition. Papandreou cunningly left the invitation open, forcing Samaras to shut the door on him again and again. Each time he did it he sounded less reasonable than before, because his mantra, "Consent to what? The mistake of the memorandum?", increasingly came off as partisan.

Samaras' strident anti-memorandum position is a result of European politics, not Greek. The government began to unravel as its reform programme faltered on internal party opposition in January. That brought it into open conflict with the troika the following month, whose officials held a press conference in Athens to announce a 50bn euro programme of privatisations the government had agreed to but was wary of announcing. Yiorgos Papakonstantinou furiously declared that the troika would not be allowed to hold a press conference in Greece again, but the damage was done. For weeks Greek media debated on whether it was possible to sell so many state assets in such a short period without heavily discounting them. Unsurprisingly, unionists rallied to preserve the public nature of their enterprises; more alarmingly, Greeks began to turn against the memorandum that is keeping Greece solvent as a tool of neo-colonialism and a Trojan horse for ruthless investors holding out for bargain-basement prices.

It was at this point that Samaras' anti-memorandum platform really fired up. Samaras saw an opportunity to present a unilateralist alternative of hope, and said he would renegotiate the memorandum. His strategy is high-risk one. It banks on the assumption that the eurozone is more desperate to save Greece than Greece is to save itself, because default will bring down banks in France and Germany, not to mention the ECB, which holds about 45bn euros in Greek debt. But as Papandreou pointed out in parliament, Greece's mammoth nuisance value would hurt both Greece and the eurozone. Indeed it did. As the debate became more polarised in recent months and Samaras saw the potential for party gains, Greeks withdrew their euros from banks with increasing speed, forcing them to recapitalise. The euro fell to new lows against the dollar in May. A creeping panic sparked conversations and newspaper columns about a Greek default and departure from the euro. The more it was denied, the more it was discussed.

But in the parliamentary debate leading up to the vote of confidence, George Papandreou at last began to act like the leader of his own parliamentary majority and the country. He remembered that it was part of his job description to give people hope as well as instructions. He shamed Samaras even while inviting him to joint government: “In a time of crisis you made a choice that forces you into the same camp as those who are betting on Greece’s failure,”  he told him.

Papandreou also addressed directly the alternative economic plan Samaras has put forward. It suggests that new growth can be self-financed through liberalisation, striking where the government's plan is weakest. Unfortunately, it goes too far in a populist direction, opining that Greece can develop its way out of the crisis without continuing down the road of cost cutting as well. And it betrays itself by targeting large voting blocs. It promises owners of illegal homes that 70 percent of them will be legalised; it promises low-earning retirees that cuts to their pensions will be restored; it promises civil servants that none of them will be fired, only shed through attrition, a proven loophole historically; it promises businesses a flat tax of 15%, down from 25% today; and it promises small and medium-sized enterprises, the backbone of the economy, that the state will pay off its debts to them overnight with a 5bn euro bond issue.

"No one agrees with your economic plan," Papandreou told Samaras, "because it blows sky high our main goal of reaching primary surplus in 2012. All our partners in the EU have rejected it... not because it’s you saying it, but simply because it leads all too quickly to bankruptcy."
Also nailing the coffin of the alternative plan was new Finance Minister Evangelos Venizelos. "I wonder," he said, "whether the opposition would have voted against the memorandum a year ago if the government had then asked for bipartisan support. Would New Democracy then have let the country go bakrupt?" Venizelos had cleverly supported at the time that the government should have sought the support of the opposition in a two-thirds majority. Such a move would have pre-empted much of the populism of Samaras that followed.
Also making the opposition look bad was the stalking out of most conservative deputies, after Deputy Prime Minister Theodore Pangalos suggested their party was a lesser force for democracy than the socialist Pasok. That smacked of cheap theatre and opportunism. Samaras had already warned in his closing remarks that New Democracy would not be supporting the government in the vote of confidence. This was icing on the cake. It was also shambolic. Samaras and his clique stayed in their seats, suggesting that the walkout was breaking party discipline. Papandreou and Venizelos seized the opportunity to ask New Democracy to respect democratic procedures and return to the chamber, even if their vote was a foregone conclusion. It was a moment in which they could underline their claim to be the adults in the political process.

The question now is whether, and how, Samaras will consider climbing down from his maximalist position. His polarising politics have not won him much support. His party polled a meagre 21% in a nationwide GPO poll for Mega channel carried out during the two days of debate, to Pasok's 20.1 percent. Papandreou still holds a five-point lead in personal ratings. And 55 percent of voters support the government's decision not to hold early elections and its decision to seek a coalition. It is too early to write off Samaras or his policies, but the feeling is irresistible that his sense of self-preservation will force some changes upon him.