By RICHARD BARLEY
George Papandreou's Socialist government is teetering on the brink—and Greece's economic program, thrashed out with the International Monetary Fund and European Commission may be teetering with it. The prime minister's decision to call a referendum on Greece's bailout has eroded his already slim majority and may lead to new elections. An election would be preferable to a referendum since it would force opponents of the current PASOK government to present voters with alternative plans. But that may simply highlight Greece's lack of room for maneuver.
The main opposition party, New Democracy, has opposed most of the measures taken by the current government, arguing they have been too heavily skewed toward tax rises. It also dislikes the proposed bond haircuts on the grounds these will require major recapitalizations of Greek institutions. It favors tax cuts, arguing they may generate more revenue if coupled with a promise to tackle tax evasion, and a greater focus on privatization and the sale of Greece's abundant real-estate assets. But these proposals face big credibility and implementation hurdles.
Even this limited agenda would require negotiations with Europe and the IMF on reopening the terms of Greece's latest bailout package, including potentially resetting its fiscal targets. It's unlikely Greece's official lenders would agree to anything other than small adjustments. True, Ireland and Portugal both agreed to changes to their rescue plans following the election of new governments, but in both cases, the basic policy prescription had broad support across political parties. Re-opening the 50% voluntary bond write-down looks a non-starter since there are no alternative sources of debt relief on the table.
Besides, it isn't at all clear what complexion of government might be delivered by fresh elections in Greece. A telephone poll conducted Oct. 30 showed the Socialist party backed by just 14.7% of voters and New Democracy by 22.2%—marking a sharp erosion in the support base for the two main parties—with a further 25.6% of voters undecided. More than half said they would rather have Greece's political parties work together than have early elections. Even then, the European Union has a track record of bending national governments to its collective will, no matter how fresh their democratic mandate. |
