ANALYSIS:The centre-right leader must form a pro-bailout government with his socialist former foes, writes
ARTHUR BEESLEY
EUROPE AND the world are facing a little less uncertainty in the euro zone after Greek centre-right leader Antonis Samaras declared a hard-won election victory. For Mr Samaras, however, the real challenge is only beginning.
It now falls to him to form a pro-bailout government with his former arch-foes in the Pasok socialist movement. Assuming this can be done in the coming days, any power-sharing deal between Samaras and Pasok leader Evangelos Venizelos is bound to come under sustained political pressure as they execute onerous austerity and reform measures in the face of grinding recession.
This is all the more so given a second strong showing for the anti-bailout Syriza movement, which has now replaced Pasok as the dominant force on the Greek left. Syriza’s firebrand leader Alexis Tsipras was neck and neck with Samaras in the latter phase of the campaign and the first exit polls last evening suggested the result was still too close to call.
In the event, Samaras declared victory after official projections from the Greek interior ministry put him in line to win a crucial 50-seat bonus in parliament and wind up with 128 seats.
Unlike in the first election last month, Venizelos was set to have enough seats to give Samaras a commanding majority. But a deal is not inevitable. “It’s going to be a long night,” said a diplomatic figure from another euro zone country who observed Samaras’s victory. “I’m not sure that he is going to be able to form a government.”
After weeks in which Greece’s participation in the single currency hung in the balance, this outcome should still be enough to remove the immediate threat over its membership. Although the prospect of the country being forced out if Tsipras won was never an outright certainty, this comes as no little relief. Any return to the drachma would carry the risk of chaos within and beyond the borders of Greece.
This danger may be receding for now but questions remain over the solidity of any Samaras- Venizelos alliance as they try to muddle their way through Greece’s abundant fiscal woes. Europe wants a Greek government within days. There is no time to lose, for Greece is way behind in the race to execute the 77 reforms required to ensure the release of its next round of rescue loans early next month which it needs to avoid running out of cash.
Samaras is essentially pro-bailout but he wants to revise the deal to add new measures into it to promote economic growth. The best he might hope for is a one-year extension of the deadline for Greece to put its public finances in order.
Europe might yield such a concession if that is the price of securing a government to work the deal and avoid an uncontrolled default but any such administration would still have mountains to climb to deliver a fundamental reconstruction of the Greek state.
There is still a glimmer of hope here for those who fear the worst for Greece, whose troubles have weighed heavily on Ireland’s battle to regain market confidence.
At the same time, Syriza’s rise points to considerable execution risk.
European leaders warned Greece for weeks that the country’s membership of the single currency is on the line. Despite all the talk of contingency planning for an exit from the currency – with capital and border controls thrown into the mix – Greeks still voted in their droves for Tsipras.
This is certain to present significant political difficulty to any government which wants to work the EU-IMF plan.
Greece will be the focus at a Group of 20 summit beginning today in Los Cabos, Mexico, and at respective meetings this week in Frankfurt and Luxembourg of European Central Bank governors and European finance ministers. The situation in Athens is also set to overshadow an EU summit in Brussels next week.
Throughout the election campaign, EU leaders had clung to their hopes that Greeks would return a government wedded to the EU-IMF rescue plan.
They are likely to get that now but Greece and the euro are still not saved. The Spanish bailout is still not secure and Italy remains under threat. There are miles to go yet.