Monday, 18 June 2012

A Twin Victory in Greece Sets the Stage for Confrontation

This analysis is also published on Al Jazeera.

Yesterday’s conservative victory in Greece signalled that Greece still wants to remain within the eurozone and on negotiating terms with its European partners. New Democracy leader Antonis Samaras called for a government of national salvation and said, “the Greek people have today voted for Greece’s European course and its remaining within the euro.”

The 50-seat bonus in parliament that goes to the top party also helps New Democracy in practical terms. It could, in theory, form a strong Europeanist coalition with the other parties that continue to uphold Greece’s loan agreements, the socialist Pasok and the moderate Democratic Left. Together they could wield a formidable 179 seats in the 300-seat legislature, effectively a two thirds majority. This is a far cry from the May election, when Samaras and socialist leader Evangelos Venizelos were unable to make the 151 seat minimum and would have had to ask for a vote of tolerance for a minority government.

As the centre-right flagship newspaper Kathimerini put it in a front page leader: "Pasok should support such a government, participate with its best talent and lend its weight in the national effort. Any other strategy would be nothing shy of criminal with respect to the country's interests. The same applies to the Democratic Left, notwithstanding the limited support it can offer to a coalition that will be called upon to take tough decisions."

On the other hand, the election has also created a powerful new anti-bailout opposition in the radical left Syriza, which took 27 percent of the vote and came just three points behind New Democracy. Although Samaras scheduled a meeting with its leader, Alexis Tsipras, the latter seemed to dispel any illusions of a grand coalition. “From our position as a responsible and active opposition, we shall demand that the government make full use [of our interventions] for the benefit of the Greek people.”

Syriza has done extremely well out of the last two elections. It sextupled its share of the popular vote and turned its 13 seats into 71. These are historic achievements for the left, whose combined share of the vote in the last four decades has never risen above 13 percent. Tsipras will likely now occupy the anti-austerity pulpit Samaras once did when the socialists were in power. He vows that, unlike Samaras, he will stick to the guns of opposition to what he calls an “unholy alliance of the forces of the past,” a reference to the socialist and conservative parties.

His promise should be taken seriously. Syriza’s 17 percent in the May election was enough to freeze a privatisation programme Greece’s European creditors view as a major component of its bailout obligations. Privatisation promises to be a major battleground for another reason. Much of the support that has rallied behind Syriza consists of public sector unions that used to champion Pasok. Privatisation amounts to layoffs and lower pensions and benefits, which they are determined to fight. Their arguments are material. Syriza provides an economic theory to complement them – that Greece’s state enterprises are not monopolies, but require investment to compete in what are open markets. To sell them downriver is to display a singular lack of national pride.

Whatever merit one ascribes to these arguments, the alliance between Syriza and the unions means that Syriza controls the street even if New Democracy manages to control parliament. The power of this should not be underestimated. It was weeks of protest marches on Syntagma Square that brought the government of George Papandreou to its knees last year, and after four years of recession Greece is heading into perhaps its most difficult winter yet.

The fact that many households are now visibly struggling to feed and heat themselves highlights another area where Syriza can seriously erode the government – taxes. The socialists followed European instructions to raise consumer taxes, which punish the poor most. Heating oil and gas, which are heavily taxed, are now beyond the reach of so many, that many apartment buildings run minimal central heating and only thanks to the residents who can pay their monthly dues. This means that those who are struggling build up arrears of hundreds or even thousands of euro. They face similar problems keeping other utilities running, and many have only managed to do so by negotiating a payment schedule of arrears they know they cannot keep to.

As if these problems are not enough, the government will face a major battle passing its 2013 budget in October. Unless Greece’s creditors offer a major extension of one or two years, Greece has to cut public spending by an estimated 11 billion euro next year and the year after. Most of those cuts come from healthcare, already struggling to cope with more than a billion in cuts this year, and the public payroll, which includes state enterprises.

New Democracy’s strategy is to shift emphasis to growth. As its economic plan states, every point of GDP creates 45,000 jobs. That in turn bolsters state revenues, making everyone happy. But it would take a very competent government underpinned by a very efficient state longer than the next six months to begin to reverse a projected 5 percent drop in GDP this year, while staying on track to eliminate the deficit in 2014. Can New Democracy manage as well under the circumstances?

Syriza has softened its position to accept the bailout loan in recognition of the fact that Greece simply has no alternative source of cheap finance other than the European Union. That is a significant retreat from its May 6 position, which was to look for alternative sources of financing in Russia and China, altering Greece’s orientation and loyalties. This is perhaps the biggest point in New Democracy’s favour. Just as Syriza holds the nuisance value of a Greek exit over the rest of Europe, New Democracy can wield the financial pipeline from Brussels as leverage over Syriza.

First, though, New Democracy has to form a government. It must convince Pasok to abandon its insistence on a government of national consensus, which would include Syriza, and join its government of national salvation. Second, it must convince the Democratic Left, a Syriza breakaway, that it will not be politically diminished by joining a pro-bailout government without dragging the mother party along. If Samaras manages this over the next three days, he will have formed the broadest coalition that can be hoped for, and achieved a strategic first blow for political stability.

The parliament transpiring from the June 17 election:

New Democracy   29.66%   (129 seats)
Syriza                    26.89      (71 seats)
Pasok                    12.28      (33 seats)
Indep. Greeks          7.51      (20 seats)
Golden Dawn           6.92      (18 seats)
 Democratic Left      6.26       (17 seats)
Communist Party      4.50      (12 seats)

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