The EU’s ‘Greek problem’ reaches a critical turn

The last stretch of a most difficult race begins today for the new coalition government in Greece under Antonis Samaras.

They will have to agree with their foreign creditors on a new austerity package worth nearly 14 billion euros that will mainly affect salaries, pensions and social benefits combined with yet another round of tax increases. Provided that the “troika” agrees on the Greek government’s proposals, and provided that the Eurogroup approves the government program on Oct. 8 and the Greek Parliament votes for it, Mr. Samaras will attend the Eurosummit on Oct. 18 and will try to obtain the approval of eurozone leaders for the next 31.5 billion-euro tranche of its 130 billion-euro bailout. He will also try to persuade them to grant a two-year extension to the terms of the bailout agreement which will give the economy some breathing space and room for development initiatives.

Greece, under a new coalition government, is again on a tight rope trying to strike a balance among a deepening recession at home, a continuous fall in peoples’ living standards, spiraling unemployment and bleak prospects for the future. The speculation on whether Greece will eventually be dumped out of the euro has not gone away and the Europeans, particularly the Germans, are not showing any willingness to help Greece further.

However, against this gloomy backdrop, there are signs that the new government in Greece is trying to reverse things by speeding up changes and by appearing determined to “change everything.” A new, decisive style expressed mainly by the prime minister and his non-elected economy minister, Yiannis Stournaras, has sent the message to Greece’s friends and foes that the government is doing everything that is required in order to bring it back from the edge of the precipice. In a recent interview with the New York Times, Samaras said Greece “is changing,” adding, “But at the same time, you ought to help us because the alternative scenario could be the end of Greece.” Samaras called his job “the most difficult job in the world, a pain,” and he admitted that he can offer “only hope.”

Decisiveness, firmness, persuasiveness and sticking to your word seem to be the most sought-after skills for anybody who heads Greece at the moment. It was what the previous two governments – particularly that of George Papandreou – were lacking, most analysts now agree. Samaras now has the huge task of reversing the feeling of mistrust among the country’s creditors and persuading them that his country is worth keeping in the euro-family. And the task is much higher given the fact that the EU as a whole seems to be undergoing an existential crisis where its entire structure is tested under the recent global economic crisis.

But if decisiveness and firmness are needed for renegotiating the position of Greece with its foreign partners, even more demanding skills are needed for controlling the domestic front. Against an avalanche of new, unbearable measures, the two leftist parties which have joined forces with Samaras’ conservative New Democracy party may not be able to keep their parties intact against the reaction of their constituents, who have blamed them for agreeing to the measures in spite of their electoral promises. A government crisis at this particular moment and the adventure of new elections would be a nightmarish scenario.

The biggest challenge, though, is the program itself. Everybody, including many experts, analysts and officials, see that in spite of the imposition of more severe measures and a strict program of structural reforms to curb the debt and deficit, “the program designed for Greece cannot work as it is.” Is Samaras holding a hidden card which would offer prospects for economic development? Does he have reasons to hope that he can get some new help from Europe?

In the next two weeks, we may witness interesting developments regarding Greece. But the way Europeans will eventually treat the “Greek problem” will also give an insight about the way they see the future of the EU itself.