Greece results bring relief but no remedy

Athens, Greece – The conservative victory in Greece’s June 17 elections is a signal that the country 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 support upholding 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 Pasok leader Evangelos Venizelos were unable to make the 151-seat minimum.The impossibility of forming a coalition across ideological lines led to Sunday’s rematch.

Powerful Syriza

But the fresh-election has also created a powerful new anti-bailout opposition in the radical left Syriza, which took 27 per cent of the vote and came just three points behind New Democracy. Its leader, Alexis Tsipras, has rejected calls for 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,” he said.

Syriza has done extremely well in the past two elections. It multiplied its share of the popular vote by a factor of six and turned its 13 seats into 71. These are historic achievements for the far left, whose combined share of the vote in the past four decades has never risen above 13 per cent. Tsipras will likely now occupy the anti-austerity pulpit Samaras once did when Pasok was 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. The 17 per cent of the vote that Syriza received 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 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 in Syntagma Square that brought the government of George Papandreou to its knees in 2011, and, after four years of recession, Greece will face 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. This means that those who are struggling build up arrears of hundreds or even thousands of euros. 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.

Battle over budget

As if these problems were 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 11bn euros ($13.91bn) next year and the year after. Most of those cuts come from healthcare, already struggling to cope with more than 1bn euros ($1.27bn) in cuts this year, and the public payroll, which includes state enterprises.

New Democracy’s strategy is to shift emphasis to growth. According to its economic plan, every percentage 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 to begin to reverse a projected five per cent 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 from 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.

Follow John Psaropoulos on Twitter: @thenewathenian