Greece
faces hard-choice election
By MATTHEW
KARNITSCHNIG 9/20/15, 12:45 AM CET Updated 9/20/15, 6:22 AM
ATHENS — As
crisis-weary Greeks head to the polls on Sunday for an election many
dismiss as pointless, the key question isn’t who wins, but whether
the next government can stay in power long enough to overhaul its
broken economy and release crucial bailout funds.
Europe has a lot
riding on the answer.
The EU is counting
on the new government to stick to the terms of Greece’s latest
bailout, an €86 billion package agreed in July after months of
contentious talks that took the country to the brink of leaving the
euro.
But accepting that
hugely unpopular program hasn’t done anything to end Greece’s
growing political instability. The country used to hold elections
every three-to-four years, but Sunday’s poll is the fourth in three
years.
With Greece heading
into its eighth year of recession, unemployment forecast to rise and
the people as disillusioned as ever, it’s unclear what will halt
the political upheaval. If the next government proves as short-lived
as its recent predecessors, the prospects for Greece’s future in
the euro are dim.
And yet the
consensus view, both in Greece and Europe’s capitals, is that
Sunday’s election is largely irrelevant. Whatever coalition
emerges, the argument goes, it will have no choice but to implement
the terms of the bailout.
“There is no other
alternative but to rebuild confidence and the only way you can do
that is to stick to the path of the program,” said George
Pagoulatos, a professor of politics and economics at Athens
University of Economics and Business and a former government adviser.
At issue is the same
thicket of creditor-imposed economic overhauls to the pension system,
labor market and public sector that sent thousands of Greeks onto the
barricades in recent years.
It was a dispute
over those very same issues that led to Sunday’s election. Alexis
Tsipras, faced with a rebellion in his leftist Syriza party over his
decision to accept Europe’s stiff terms for the bailout, called the
vote last month, capping a rocky seven months as prime minister.
Just weeks earlier,
he held a controversial referendum on the bailout plan. Though almost
two-thirds of Greeks rejected the terms, he struck a deal with the
country’s creditors anyway to keep Greece in the euro.
Pagoulatos said the
dramatic events of the summer, including the introduction of capital
controls that remain in effect, amounted to a “near death
experience” for the country that showed Greeks they had no
alternative but to accept the reforms if they want to remain members
of the common currency.
“It was a moment
of clarity,” he said.
Syriza’s next
steps
Still, it’s far
from certain that Tsipras will stick to the agreement with Europe if
he’s reelected.
Syriza surged to
power in January on a promise to reverse the public spending cuts at
the center of the debate. Tsipras’ decision to impose even deeper
cuts has left many of the party’s supporters disillusioned and
prompted a group of far-left MPs to break away and form a new party.
“I don’t see
things going smoothly,” said Yannis Koutsomitis, a Greek political
analyst. “There’s a question about how his MPs will react once
they have to vote on the reforms.”
A block of Syriza
lawmakers skeptical of the reforms has already been urging him to
push to water down the agreement. On Friday, Tsipras told Greek
television that he would press for relief of Greece’s crushing debt
burden.
Polls published last
week showed a dead heat for first place between the left-wing Syriza
movement and the center-right New Democracy with a collection of
smaller parties, including pro-European centrist forces, vying for
third.
For the bailout to
go forward, the new government would have to immediately set about
enacting a slew of reforms in coming weeks. Only then would creditors
release further aid.
If Athens delays, it
could also jeopardize a planned €15 billion recapitalization of its
banks. The recapitalization would pave the way to begin lifting
capital controls.
If the
recapitalization is delayed until next year, however, new regulatory
rules requiring a so-called bail-in of depositors would apply to the
banks. In Greece’s case, that would wipe out many small businesses
that count as the banks’ main depositors.
If Syriza wins, the
outlook for reform will largely rest on the party’s coalition
partner − Tsipras has ruled out forming a coalition with New
Democracy. If the party goes into coalition with a pro-European
party, the chances the bailout program will go forward are greater
than if renews its coalition with the nationalist Independent Greeks,
analysts say. The latest polls suggest the nationalist party may not
garner the 3 percent of votes needed to enter parliament, however.
If Syriza loses to
New Democracy, the bailout could be even more at risk.
Though New Democracy
has committed to adhere to the agreement, Syriza might decide to
agitate against it from the opposition.
“It can’t be
ruled out that he does another mea culpa and changes course,”
Pagoulatos said. “Anyone who has tried to look ahead and predict
Tsipras’ next steps has failed spectacularly.”
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