piigsty

Newsflash. Economically, Greece is in pretty poor shape. Previous PIIGSty articles have assessed and analysed the Greek situation (nearly to death…) including the two EU-IMF bailout packages (see here and here and here)

So why is Greece back in the news?  Turns out that politically, Greece – the birthplace of modern democracy –  is in pretty poor shape too. On 6 May, the Greeks went to the polls to elect a new parliament. Despite huge political pressure (and compelling scenes of social upheaval and public anger), the governing unity coalition of the two historically biggest parties continued to implement the severe austerity measures necessary to correct the structural weakness of the Greek economy. For a handy PIIGSty.com chart on the evolution of the Greek economy, see here

Predicted PASOK Disaster

Of course, PASOK and ND were expected to receive a thumping but some other results stunned Europe and pollsters alike. As predicted, the remaining two parties in the unity coalition shouldered the blame from the Greek people as PASOK (centre-left) and New Democracy (centre-right) suffered massive vote losses of 31% and 15% respectively. In the 300 seat Greek parliament, PASOK under new leader and former Finance Minister Evangelos Venizelos lost 119 of its 160 previous seat total  (to 41 MPs).  However, in terms of their overall vote share – it was their worst result since their founding, garnering just 32% between them, down from 80%+ (The ND gained seats despite this sharp decline as the overall vote winner recieves a bonus of +50 seats/MPs under the Greek system).

The result meant the incumbent coalition which oversaw the imposition of the EU-IMF austerity programmes, was reduced to 149 seats, an agonising 2 MPs short of a governing majority.

The Surprising Winners

The surprising aspect was the severe fracturing of the vote to new parties and the success of the fascist extremist ‘Golden Dawn’ party which won 21 seats. With the implosion of PASOK, a number of young or newly founded anti-austerity parties from across the political spectrum did well. The conservative ‘Independent Greeks’ lead by former rebel New Democracy MP Panos Kammenos won 33 seats while the social democratic ‘Democratic Left (DL)’ gained 19 seats.  Both have refused to take part or support a new ‘austerity’ PASOK-ND unity coalition but there is wiggle room as signals abound that a small scale ‘renegotiation’ of the austerity programme or some sort of accommodation may be possible, in exchange for a stable unity coalition deal that would last at least 2 years until the European Elections in 2014.  If a coalition deal is hammered out, through sheer number of MPs, ND leader Antonis Samaras would become PM replacing technocrat PM Lucas Papademos although all three ‘main’ party leaders (PASOK, ND and SYRIZA) will be given the chance to try form a government. Under the Greek constitution, the task to broker a deal falls to Greek President Karolos Papoulias

SYRIZA Scores Second

For now, Greece is divided politically along the ‘austerity’ fault line rather than ideologically. If no government can be agreed by May 17, its back to the polls. To get to a workable majority, PASOK and ND must steer through a political minefield. The pivotal spanner in the works is proving to be the success of the ‘Coalition of the Radical Left’ SYRIZA party which ended the ‘seesaw’ duopoly of Greek political power by ousting PASOK to become the second biggest party in parliament with an unprecedented 12% gain in vote share and nearly 40 seat gain to 52 MPs. Had SYRIZA received only 160,000 more votes and beaten ND to first place, they would have received the +50 seat bonus and ended up with over 100 MPs. As a result, its leader Alexis Tsipras is now in a very powerful position. With his eye on a rematch, Tsipras is making a gamble and dragging his feet in coalition talks – most likely a political calculation and trying to make the delicate process as difficult as possible. If another election is required within a matter of weeks (still the most likely option), polls suggest SYRIZA is poised to mop up other anti-austerity protest votes from the various new minor parties, possibly pushing them into first place in votes and making SYRIZA the biggest party in parliament. However,  Tsipras’ behaviour since the election has angered many in the smaller parties which he would need to form an anti-austerity government. Basking in the media spotlight, an increasingly confident Tsipras has routinely lambasted both PASOK and ND, accusing them of lies, criminality, blackmail and barbarism – signalling he is extremely unlikely to prop them up to run Greece for even a truncated 2 year term.

Back to the Polls?

Democratic Left (DL), SYRIZA and the Independent Greeks all reject the terms of the bailout agreements which PASOK-ND endorse, in varying degrees – with DL the most malleable with less vitriolic demands for a ‘phased renegotiation’. Of the parties, it is therefore most likely key to agreeing a last minute deal to stave off a political crisis – but significant hurdles remain. All parties agree (emphasized by DL) that the success of SYRIZA means their exclusion from any coalition would immediately undermine its legitimacy and ability to govern. Another election might just see SYRIZA pip ND to first place and give them a fair shot at cobbling together and leading an unwieldy ‘anti-austerity’ coalition with Tsipras as PM.

In the meantime (par for the course) talk about Greece being unceremoniously ejected from the eurozone continues despite public opinion remaining strongly supportive of maintaining the status quo.

With no agreement, the date most likely for an election is June 17 – which, if it happens, could prove a defining moment in the history of the eurozone

*UPDATE*  Talks have collapsed (15 May). Mid-June elections are now virtually certain.