A political solution for Greece
| Author: Dionyssis (Dennis) Kefalakos New Europe's Notebook, by Dennis Kefalakos 22 May 2011 - Issue : 936 |
Political pressures are mounting on Greece and are coming from all over the world. Everybody says that the country should honour the programme it agreed, to the last detail, in order to arrest its still huge fiscal problem.
Policies applied during the past twelve months were just horizontal cuts in the public sector pay bill and pensions, accompanied by tax increases, accounting for only one third of the road needed to be covered, as provided by the agreement the country has signed with a troika of EU-ECB-IMF. The government budget deficit in 2010 was recently announced to have remained at double digits with 10.4% of the GDP. Greece must lower this percentage to less that 3%. For the country, however, to be accepted again in the debt markets, its accumulated sovereign obligations must also be substantially reduced from the dazzling 160% of the GDP today.
All that can be achieved through a massive privatization programme and more cuts in public spending. But is there the right political environment to sustain such a programme?
In any case, a political platform for all those painful measures must urgently be in place over the coming few months, because such an internal national consensus in Greece will provide the other 16 Eurozone governments with the arguments needed to pass in their Parliaments the new aid money Athens will need during 2012 and 2013. In reality the country will be called to sign a new Memorandum with the troika of EU-ECB-IMF. If this process falters in one step, Greece will be soon in trouble. This was the background on which Commissioner Olli Rehn based its bold suggestion to Greece’s political parties last week that they have to come to a consensus, if their country is to receive more support from the EU.
This “advise” is mainly addressed to New Democracy (ND), the major opposition center - right conservative party, which governed the country until the last days of the “free borrowing” in late 2009. Antonis Samaras, ND’s president however, may demand that his party should participate in the negotiations for the second Memorandum, if ND is to share responsibilities.
Let us however, take this logic to its final consequence. If Samaras openly participates in negotiations with the troika, he would seek to come up with something positive that can be attributed exclusively to him. Is the troika ready to get mixed up in the Byzantium of the Greek politics?
In any case there is no other way to manage the Greek mess. Fixing the right political environment for Greece to endure a long winter is still a task that has to be done. The government of George Papandreou - who won the November 2009 election with a comfortable majority - after eighteen months in power and an almost complete failure to grasp the depth of the problems, has spent almost all his political capital. Will elections be a solution?
Probably yes. But a hung parliament would be, for sure, the result if a general election was now held. Such a prospect however would increase the pressure on Samaras to participate in a “national salvation” government and try together with Papandreou to perform new…surgeries. Certainly such a government would be able to apply strong measures, which do not however need much political and administrative planning or abilities. In a probable joint Pasok and ND government, everybody will be fighting to get credit for the slightest success and discredit the other side with everything that goes wrong.
In any case the two biggest parties together can introduce more painful policies of general character, like another across the board 30% reduction in all public sector salaries and pensions. The rest of their dally governing time will be occupied by inventing ingenious ways to… hide public sector expenses from the Troika.
Policies applied during the past twelve months were just horizontal cuts in the public sector pay bill and pensions, accompanied by tax increases, accounting for only one third of the road needed to be covered, as provided by the agreement the country has signed with a troika of EU-ECB-IMF. The government budget deficit in 2010 was recently announced to have remained at double digits with 10.4% of the GDP. Greece must lower this percentage to less that 3%. For the country, however, to be accepted again in the debt markets, its accumulated sovereign obligations must also be substantially reduced from the dazzling 160% of the GDP today.
All that can be achieved through a massive privatization programme and more cuts in public spending. But is there the right political environment to sustain such a programme?
In any case, a political platform for all those painful measures must urgently be in place over the coming few months, because such an internal national consensus in Greece will provide the other 16 Eurozone governments with the arguments needed to pass in their Parliaments the new aid money Athens will need during 2012 and 2013. In reality the country will be called to sign a new Memorandum with the troika of EU-ECB-IMF. If this process falters in one step, Greece will be soon in trouble. This was the background on which Commissioner Olli Rehn based its bold suggestion to Greece’s political parties last week that they have to come to a consensus, if their country is to receive more support from the EU.
This “advise” is mainly addressed to New Democracy (ND), the major opposition center - right conservative party, which governed the country until the last days of the “free borrowing” in late 2009. Antonis Samaras, ND’s president however, may demand that his party should participate in the negotiations for the second Memorandum, if ND is to share responsibilities.
Let us however, take this logic to its final consequence. If Samaras openly participates in negotiations with the troika, he would seek to come up with something positive that can be attributed exclusively to him. Is the troika ready to get mixed up in the Byzantium of the Greek politics?
In any case there is no other way to manage the Greek mess. Fixing the right political environment for Greece to endure a long winter is still a task that has to be done. The government of George Papandreou - who won the November 2009 election with a comfortable majority - after eighteen months in power and an almost complete failure to grasp the depth of the problems, has spent almost all his political capital. Will elections be a solution?
Probably yes. But a hung parliament would be, for sure, the result if a general election was now held. Such a prospect however would increase the pressure on Samaras to participate in a “national salvation” government and try together with Papandreou to perform new…surgeries. Certainly such a government would be able to apply strong measures, which do not however need much political and administrative planning or abilities. In a probable joint Pasok and ND government, everybody will be fighting to get credit for the slightest success and discredit the other side with everything that goes wrong.
In any case the two biggest parties together can introduce more painful policies of general character, like another across the board 30% reduction in all public sector salaries and pensions. The rest of their dally governing time will be occupied by inventing ingenious ways to… hide public sector expenses from the Troika.
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