Greece
may take credit for inventing democracy in about 500 BC but her observance of
its principles has been at best fitful. Of course in the shiny European Union,
democracy is touted as the ideal system (unless it clashes with the wishes of
the EU apparatchiks) and Greece
herself has been reminded this week that democracy can limit the free rein of
her politicians (no bad thing) and paralyse her government (a serious
inconvenience).
Greece
is in an even greater tangle than usual. Years of economic misgovernment and
misinformation, endemic corruption and tax evasion, an incompetent and grossly
bloated public sector, feeble productivity and rampant consumption have led to
a disastrous level of debt, bearing the threat of incipient bankruptcy. In a
wearying process, Greece
has been bailed-out twice in May 2010 and February 2012 with amounts totalling
€240bn by the Eurozone countries, the ECB and the IMF (“the Troika”) and has
imposed a 70% haircut on its private bondholders. The bail-outs were granted on stiff terms
requiring Greece
to impose harsh austerity and boost its tax take. The medicine is not working
as Greek business is collapsing after 5 years of recession and unemployment
stands at 21%.
The terms of these deals have been hugely controversial in Greece. The
PASOK government of George Papandreou postponed the difficult job of cutting
public sector staff levels and instead concentrated on cutting state pensions,
typically by 30%, raising income taxes and VAT, levying a “solidarity” tax and
worst of all introducing at short notice an entirely new and heavy property tax,
collected through the electricity bill. No payment, no power – probably illegal
but very effective. Realising his mandate was weak, Papandreou suddenly
proposed on 31 October 2011 a referendum on the terms of the second bail-out.
This caused consternation in Brussels
and soon enough Papandreou was forced to resign and an interim government was
formed with unenthusiastic support from the conservative New Democracy with the
appointment of central banker Lucas Papademos as prime minister until the
second bailout was passed through parliament.
Elections duly took place on 6 May and the results were as
shown below. The pro-bailout party PASOK was decimated – it previously held 153
seats and pro-bailout New Democracy slumped 10% in voting terms although it got
a bonus of 50 seats as the highest polling party under the Greek system. All
the other parties are hostile to the bail-out.
The major surprise was the strong showing of Syriza, a
ramshackle coalition of leftist and ecological campaigning groups led by the
charismatic 38-year-old Alexis Tsipras. He won 16% of the votes against New
Democracy’s 18.8%. He has consistently opposed the bail-outs root and branch,
although the details of quite how Greece would operate if it were
outside the euro have not been articulated with any precision, although there
has been plenty rhetoric. Opinion polls now show that if there were new
elections, Syriza would poll highest at 27%, New Democracy would get 20% and
PASOK would shrink further. The anti bail-out Independent Greeks, a New
Democracy splinter group, would more or less hold its vote as would the
Democratic Left. Neo-Nazi Golden Dawn, about which many get agitated, would
drop from 7% to about 4% as they essentially attract a protest vote.
Attempts by New Democracy, Syriza and PASOK in turn to form
a coalition have failed. The Greeks don’t really do compromise and there has
been rancour between the pro- and anti-bail-out camps. Some kind of caretaker
coalition will probably be patched up by President Papoulias until fresh
elections in June 10 or 17.
The Greek political landscape will change radically.
Assuming Syriza emerges as the strongest party, a coalition between it,
Democratic Left and dissident PASOK members is quite likely. PASOK has been
characterised by its own leader Evangelos Venizelos as “rotten” and it may
dissolve. The position of Antonis Samaras as leader of New Democracy is
vulnerable especially if he loses a June election and that party could
disintegrate too.
A Syriza – led government will reject the bail-out terms.
Endless deflation and austerity is economically illiterate and politically
unsupportable. In due course it will be clear that Greece cannot continue within the
Euro, it will default, return to the drachma, but hopefully stay within the EU. Syriza would be wise to moderate its populist
anger at inflexible Angela Merkel, snarling Wolfgang Schauble and the demonised
EU man in Athens Matthias Morse and IMF’s Poul Thomsen as it will need some
goodwill to achieve a soft landing. A future Greece will need all the friends it
has, while it rebalances its economy.
If the people have chosen, it is madness to ignore them.
Sometimes democracy comes up with the wrong answer but the Greek electorate is
happy to have given the corrupt Old Guard a bloody nose. The Euro Project will
receive a setback, but probably not a mortal wound – that will need blows from
heavier hitters like Spain
and Italy.
SMD
14.05.12
Text Copyright Sidney Donald 2012
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