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Thursday, May 10, 2012

The buck passing continues in Greece

The political situation in Greece following Sunday's elections is getting even messier. Following the failure of conservative New Democracy to even begin a serious discussion about forming a government (negotiations lasted all of six hours), the Radical Left (SYRIZA) yesterday also threw in the towel. The "dream" of a leftist Coalition government had failed, said SYRIZA's leader Alexis Tsipras, but added that his party had nonetheless forced Europe to reconsider the Greek bailout package (perhaps a bit premature). 

The buck has now been passed to socialist PASOK, the former governing party which slumped to third in the elections. PASOK leader Evangelos Venizelos said yesterday that he will ask Greek President Karolos Papoulias - who by now must be a seriously nervous man - to give him the go-ahead to start discussions with other parties in a last-ditch effort to try to form a government. If that fails, we're definitely looking at fresh elections, probably in June. The prospects for PASOK succeeding are slim - to say the least.

So what's going to happen? Frankly, heaven knows. As we have noted before, even fresh elections may not generate a stable government, though there's a chance that those people who voted on smaller parties that didn't get over the 3% threshold to enter the Greek parliament, may shift their votes to bigger parties. SYRIZA clearly remains the X-factor, and could potentially pick up more votes. The party has outlined a five point plan - including completely ripping up the bailout agreement - that is simply fundamentally incompatible with the position of the Germans and the IMF. The politics are immensely complicated, but if SYRIZA's support is required for forming a government, then we're basically looking at three potential outcomes:

1) SYRIZA and Germany/IMF stick to their guns, the bailout cash is frozen, Greece defaults and almost certainly leaves the euro
2) SYRIZA caves and Greece is given the next tranche of bailout cash and the charade continues for a bit longer
3) Germany/IMF cave, the bailout terms are revised and Greece is given the cash

Perhaps a path between the second and third options would be possible too - and given the stakes, not unlikely. In any case, it ain't lookin' good.

6 comments:

Chris Gilmour said...

Sir,

Is it possible that Greece could go the way of Belgium and exist for a significant period with no government?

Rgds

Chris Gilmour

christina Speight said...

What I find astonishing is the extent to which brainwashing has convinced the Greek electorate that the euro is desirable [70% I understand, want to remain with the euro]

The solution to their undoubted woes can only be found if they leave the eurozone, reinstate a freely floating currency and manage their own affairs with no 'quisling' prime minister.

Portillo in his programme on Greece last night offered all those he interviewed the option of drachma v euro. ALL went for the euro.

These poor people really love their chains.

Bugsy said...

They also showed Portillo that they understood that the EU had brought them the (illusion of) prosperity that they and the other PIIGS have seen. They, like the rest of the PIIGS think that showing loyalty to the EU and the Euro
will ingratiate them with the Germans and so eventually bring back the good times. They are all blind to the reality that whole project has been destroyed by both the greed of the rulers of Europe (MEP's, Commissioners and Officials) and the incompatibility of culture between northern and southern europeans.

Hydriot said...

I am in Greece at the moment. I have known the country for 47 years.

Euro or drackma? Greeks answer 'euro' because they are asked the wrong question. They should be asked: "Would you prefer euro + austerity plan or drackma + no austerity plan." They hate the austerity plan more than they love the euro.

Secondly, SYRIZA coming within 1.8% of beating ND to first place is the big event of the election. But Greece has this weird system of awarding the first party a bonus 50 seats. So the anti-memorandum side wants/needs a second election on 17 June when we may expect massive tactical voting in favour of SYRIZA just to get those 50 bonus seats on the anti-memorandum side. KKE (the Communists) are opposed to both the euro and the EU, but refuse to co-operate with other leftist parties. So I predict a significant tactical vote from traditional Communists to SYRIZA on 17 June, for this one election only.

Rik said...

@Christina
Next to the Euro Greece also has the problem that it got a governing culture you usually see in Africa or South Asia. It is simply run with the efficiency, credibility and standards for governess of a bananarepublic.
So getting out of the Euro could make things easier as far as currency is concerned, but at the end of the day looking at education level, economic basis (companies with pricing power) and quality etc of its government it should be happy with a standard of living of half what they had in the good times.

@Hydriot
Austerity is basically with and without the Euro.
They import most of their things so an Euro exit means half the goods can no longer be imported (as suppliers want to be paid a) in cash and b) in real money).
Furthermore if they mess things up and the links are broken a lot of EZ countries will likely want to get even, so drop in EU subsidies etc.
Exit will also mean most likely back to zero deficit so harder cuts than now (nobody wants to lend them anything anymore. As they still run a deficit even without taking interest into consideration. A bankrun and a few other problems.
Exit the Euro therefor solves simply only part of the problem.
So the question you want to ask is as inadequate is the prior one.
Austerity type A and Euro OR austerity type B and exit. Is the right question.

Rodney Atkinson said...

What is incredible is that no one seems to have grasped that the Greek equivalent of the Tory Party (and equally eurofederalist) could with 108 seats have formed an anti Euro block with the Independent Greeks (33 seats) and governed as a large minority. On the fundamental Euro and constitutional issues the two other anti Euro parties on right and left might have voted with them.