NEW DEMOCRACY, and parties willing to implement Greece’s austerity plan, may have won the election, but, as nervous markets have reflected in their briefest of rallies, the country and the euro are as far from out of hot water politically or economically as ever. A breather, at best.
Party leader Antonis Samaras remains 22 MPs short of forming a government on his own and was last night engaged with much-depleted socialist party, Pasok, the former governing party, to put together a coalition. The latter remains uncertain about whether it will join a government or support it from outside. Another small left-wing party may also become involved in the coalition.
The task faced by Samaras, a divisive figure, is Herculean. Greece’s fractious politicians are not genetically or culturally hardwired for co-operating or coalition-building, a legacy of the bitter divisions created by the country’s civil war. There are real concerns for even the short-term stability of any coalition now agreed once it is faced directly with the harsh reality that the bailout agreement requires Greece to find €11.7 billion in spending cuts in June to qualify for its next loan instalment.
Greece’s economy is expected to shrink 5 per cent this year after contracting by 7 per cent in 2011, and unemployment is running at almost 23 per cent. Last month EU member states withheld €1 billion in loan disbursements pending the election – the country remains a hair’s breadth of not being able to pay public service salaries and pensions, let alone bond redemptions. Its banks, subject to a slow, steady run on deposits, are now completely reliant on the continuing goodwill and cash of the ECB. That goodwill, in turn, is entirely dependent on a new government rapidly moving to convince Greece’s increasingly impatient allies that it wants to and can fulfil its obligations, and can engage with the radical structural reform that the economy needs.
But Samaras needs help that his EU partners must give, even if only in terms of his proposal to extend fiscal targets by a couple of years. The current terms of Greece’s bailout are unsustainable and threaten to hobble any recovery and to make inevitable the outcome that this election was fought to avoid, a Greek departure from the euro. Regrettably, despite hints to the contrary from members of her own government in recent days, Chancellor Angela Merkel yesterday again rejected any idea of further concessions to Greece at a meeting of G20 leaders in Mexico. It is to be hoped that her fellow EU leaders will prevail on her to see sense.
A bit like Irish football fans in defeat, the supporters of the left-wing alliance Syriza were on Sunday night in full celebration mode. But unlike Trap’s army their team, having nearly doubled its vote, is still very much on the pitch. “From Monday we will continue the fight,” party leader Alexis Tsipras told cheering supporters at a rally outside Athens university. “The next government after this one will be a left government . . . We will fight to topple these policies.” No idle threats.