A new political landscape in Greece
Finance ministers meeting in Brussels today are expected to give their final approval to the second bailout for Greece. It would be the conclusion of a long period of delicate negotiations, anguish and arm-twisting between Greece and its lenders that, at times, looked like it would never come.
As it turned out, the Greek team under Economy Minister Evangelos Venizelos persuaded its interlocutors to “the largest restructuring of government debt in history.” Under the deal, the lenders agreed to exchange their Greek bonds with new ones for a lower value and a lower rate. Through this agreement, 105 billion euros would be wiped off Greece’s debt burden with the aim of cutting Greece’s debt from 160 percent of GDP to a little over 120 percent of GDP by 2020.
The Greek team, European leaders, the International Monetary Fund, as well as private lenders, all expressed their extreme joy, calling the agreement “historic.” Only Greek Prime Minister Lucas Papademos advised his ministers against expressions of “exultation.”
“Many investors, but also many of our citizens, registered losses [after this deal] which should make us think about our mistakes that led us here,” he said.
He had serious reasons to say this. The deal does not come without a high cost for Greek citizens. A new austerity package, probably in June, will create more unemployment, increase taxes and decrease salaries and pensions. It is a recipe that Greeks have come to know well in the last two years and two memorandums. The latest GDP figures showing Greek economy contracting by 7.5 percent in the final three months of last year surprised anybody.
The feeling of exaltation for the ‘historic deal” is not shared by Greeks on the street. For them, the new deal will just prolong the period of confusion, uncertainty and pessimism already hitting everybody.
However, Greeks on the street will be the stars of this drama in a few weeks’ time when they cast their vote in the most unpredictable elections in Greece’s recent history. With polls indicating that there is an unprecedented high percentage of public disapproval against traditional politics, nobody can make predictions. One thing is certain; the dramatic collapse of the socialist PASOK and the even more dramatic exit of its leader, George Papandreou, acted like a cluster bomb. It resulted in a serious fragmentation of the political power and led to the formation of new parties that could enter Parliament. Out of the three million PASOK voters in the last elections, only one third are expected to vote PASOK again. Venizelos, who apologized publicly Saturday “for our mistakes as a PASOK government,” is the likely new party leader but it is doubtful whether his “swap deal” will attract domestic voters. More than ever, the view of the Greek reality as seen by the political establishment and society is diametrically different.
After three painful years of austerity, the dividing line between left and right in Greece has changed. The new division separates the parties according to their attitude toward the “troika” of lenders. The main parties of both PASOK and the center-right New Democracy are considered as possible partners in applying necessary austerity measures dictated from abroad. Everybody else, the three leftist parties, as well as the extreme right parties and others likely to be formed by the elections later in spring, belong to the anti-memorandum bloc.
New Democracy is expected to come first and may need PASOK, as well as possibly extra partners, in order to govern.
They say that the entrance of the IMF in a country stirs up its political life, too. Even if a government is formed after these elections in Greece, it is doubtful whether it will be able to govern for long. It may need several more trials before the political landscape is settled into something permanent and is certainly different than the present one.