‘Devil’s week’ ahead for Greece

“There are two very different paths the country can take. One is a path represented by the president, which, at the end of four years, would mean we’d have $20 trillion in debt, heading towards Greece.”

That sole reference to Greece by Republican presidential candidate Mitt Romney during the presidential campaign may have been quite hurtful for Greek-Americans, but it was instructive in showing how the “faulty Greece” stereotype has replaced “Greece, the cradle of democracy” in the international political discourse.

However, when the top Court of Auditors in Athens last week declared as “unconstitutional” the pension cuts planned in the next austerity package last week, few could have missed that the euro fell badly against the U.S. dollar.

With the week ahead full of unpredictable news, Greek journalists are calling it a “Devil’s week.” The wobbly coalition government under Antonis Samaras is set to ask the Greek Parliament on Wednesday to vote on a multiple bill of austerity measures for more spending cuts, tax rises and labor market reforms, worth 13.5 billion euros overall. The debate for a stringent budget for 2013 has also started, and is expected to be voted on at the beginning of next month. If the bill is not passed then the loan worth 31.5 bn euros agreed by Greece’s lenders (IMF, ECB and EC) will not be released.

Economy Minister Yiannis Stournaras has warned that “wrong choices” could lead the country out of the euro to a disorderly default, and asked all deputies to vote in favor of the new bill and budget. “The deputies will be asked to take the most difficult decisions in Greek parliamentary history, but I am sure they will be up to the challenge,” he said, predicting that after achieving a zero primary surplus this year, the Greek economy would show a 0.5 percent increase in its GNP in 2013.

While none of the 127 deputies of Samaras’ party, New Democracy, are expected to vote against the bill, serious debates are shaking the two other coalition parties, albeit from a different perspective. The Democratic Left party, with 15 deputies, is deeply skeptical about the bill and has stated that it will vote “no,” although it “supports the government.” PASOK, with 33 deputies, is deeply divided and is “collapsing from inside” according to some of its members who are now openly challenging Evangelos Venizelos’s leadership. Although a simple majority of present deputies is enough for the bill to pass, a wide majority is a matter of credibility for the government in the eyes of its European partners.

The bill is likely to pass, even if only by a narrow margin. The eurozone will probably release the much-awaited 31.5 billion euros to give breathing space for the government to proceed with its plans. There are also rumors about the formation of a new pro-European center-left party to replace PASOK and join forces with Samaras’ camp, which would also work against any likely break-up of the coalition.
However, with the opposition leftist SYRIZA heading the opinion polls and the extreme right gaining popularity, many are warning of even tougher days ahead. According to a prominent economist, the new budget will cause the national debt to jump to over 200 percent. This has led to calls for the formation of a new national government to include the left, in order to renegotiate the repayment of the country’s loans with its lenders.

Last August, U.S. President Barack Obama, fearing that a Greek exit from the eurozone and the resulting market destabilization would harm his prospects for re-election, had asked the EU to “keep Greece inside the eurozone until the American elections.” That means, I suppose, until Wednesday!