Is there a way for Greece to get out of the crisis?
Three weeks of street protests, a couple of PASOK MPs resigning last week, a few more PASOK deputies challenging Prime Minister George Papandreou’s leadership qualities, rampant unemployment, riots and one of the worst financial crises in modern Greek history culminated on Friday in a cabinet reshuffle. Papandreou is facing the most intense criticism since his election in October 2009, both from his party and from Greek society. What on Wednesday night looked like a coalition government with the main opposition New Democracy party was transformed on Thursday into an intraparty “elections reshuffle.” The new government was sworn in on June 17 and will be up for a confidence vote tomorrow. The opposition parties are not impressed with the reshuffle. Most citizens reacted by saying, “It’s just the same old same old.” Not much is expected from this new government. Why? To begin with, Papandreou’s effort to regain the confidence of the Greek public began with the ambitious idea of a coalition government including many technocrats, but ended up with a mild cabinet reshuffle, satisfying the narrow interests of the ruling political party. For example, his efforts to recruit Lucas Papademos, who has served as vice president of the European Central Bank, as finance minister did not bear fruit. This is just one example of Papandreou’s failure to bring technocrats into the government. Instead, Evangelos Venizelos, a professor of constitutional law and defense minister until today, took up the burden. Moreover, Theodoros Pangalos remained deputy prime minister despite the fact that he has been the target of most of the chants during the recent street protests. Most ministers were not changed and three important ministers were demoted but kept: Giorgos Papaconstantinou, the ex-minister of finance, Yiannis Ragousis (interior), and Haris Kastanidis (justice). However, there is a more positive way to read the news. Papandreou wanted to create a team that agrees with him. One step was to remove Louka Katseli, who was probably a victim of her disagreements with the troika of the European Central Bank, IMF and European Commission. Another was to appease PASOK’s political base and silence a wave of internal criticism that has been mounting within his party. To achieve this, he removed some of his close friends that had been intensely criticized and included some of his personal critics in the government. Last but not least, promoting Venizelos – his party rival and contestant for the leadership of the party – to deputy PM significantly changes the internal dynamic within PASOK. Party cohesion is arguably a precondition for the government to pass the new austerity measures required to secure more loans from the EU and IMF. Despite these co-option tactics, however, the new government has already found its critics from within the party. A few minutes after the new government was sworn in, PASOK MP Odysseas Voudouris argued that the reshuffle was unsatisfactory. Regardless, as a result, the whole political party is seen as an “accomplice” of Papandreou in this effort. There are also important changes in the functioning of the government. The premier created a “Governing Committee” – something that has been demanded by many party members – where 10 ministers participate, and also added a second deputy PM position. These changes aim to enhance Papandreou’s ability to delegate responsibility and for the government to coordinate more efficiently. Another important fact is that Pangalos will not be part of the Governing Committee – something that might appease some of his many critics. Turning to the Finance Ministry most people believe that Venizelos may be better in negotiations than Papaconstantinou. Venizelos is an experienced politician and a charismatic speaker. He has headed a number of ministries. Nevertheless, he is not an economist and thus will have to rely on the advice of others. Finally, two promising new faces in the government are Stavros Lambrinidis (BA from Amherst, JD from Yale), new minister of foreign affairs, and LSE Professor Ilias Mossialos, government spokesman and minister of state. In the meantime, the Eurogroup was meeting yesterday in Brussels to decide on the next installment from the EU-IMF bailout package. It seems that developments in Greece have also alarmed French President Nicolas Sarkozy and German Chancellor Angela Merkel to the point that they rushed to declare that they will provide further assistance to Greece and that the private sector can also participate in this scheme on voluntary basis – a highly contested point so far. Nevertheless, with few exceptions, the changes have not impressed the Greek people – who are still waiting for social justice – and it is unlikely that they will restore the confidence of our foreign creditors. If this government fails to regain the confidence of the people, then Greece will have to hold early elections. The only certainty is that from these elections a one-party government is unlikely to emerge.