GREEK ELECTION
Pro- Euro parties score victory.
GGerman officials, echoed by other EU finance ministers, said that while the basic austerity program for Greece is not up for renegotiation, there can be some flexibility on the timetable.
reek voters gave grudging support in Sunday’s parliamentary election to parties favouring continued grim economic austerity measures. The result creates some optimism that the financial crisis in the European Union and those members using the common currency, the euro, can be managed.
Official predictions after the polls closed show an alliance between Greece’s traditional parties of power in the past four decades who favour sticking with the EU’s demanding bailout package, conservative New Democracy and the socialist PASOK, can form a coalition with 159 seats in the 300- seat parliament.
However, this slim but workable coalition majority is only possible because New Democracy will benefit from a facet in Greek election law that gives the leading party an additional 50 parliamentary seats.
The wider picture is that after five years of recession, regularly sparking disturbances on the streets, Greek voters remain bitter at the perceived corruption and wastefulness of their political masters, and the harsh belttightening demanded by the Central Bank of the 27- member EU and the International Monetary Fund ( IMF) in return for bailout cash.
Syriza, a hard left wing party led by former Communist Alexis Tsipras which has vowed to ditch the current austerity agreement, won about 27 per cent of the vote on Sunday, close behind the front- running New Democracy with about 30 per cent.
Tsipras conceded defeat, but said he will not join the national coalition advocated by New Democracy leader and probable Prime Minister Antonis Samaras. Instead, Tsipras said, Syriza will mount a strong opposition to the austerity program.
There were signs Sunday night that EU finance ministers believe the result of the Greek election has given them a narrow window of opportunity to curb the gathering lack of confidence in the euro, which is used by 17 of the 27 EU members.
The finance ministers, led by Germany which has become both the paymaster of the euro and the most adamant demander of austerity measures among its spendthrift partners, offered the Greeks a modest, but important olive branch.
German officials, echoed by other EU finance ministers, said that while the basic austerity program for Greece is not up for renegotiation, there can be some flexibility on the timetable.
The agreement calls for the Greek government to implement 77 austerity measures, including the sacking of 150,000 civil servants, the raising of taxes, and the cutting of salaries and pensions, in order to receive a bailout worth $ 300 billion from the EU and the IMF by the end of the summer.
Without that money Greece will go bankrupt and probably be forced to leave the eurozone.
The offer of timetable flexibility to Greece reflects a significant shift in the political balance in the EU between the advocates of untrammelled austerity and those who think troubled economies should also be offered employment- creating stimulus packages.
The austerity camp was unassailable when it was led by Germany’s Chancellor Angela Merkel in partnership with French President Nicolas Sarkozy.
But the defeat in the presidential election last month of the conservative Sarkozy by the socialist Francois Hollande changed the equation. The influence of Hollande, who favours a blend of stimulus and austerity measures, was reinforced on Sunday when his Socialist Party won a clear majority of 320 seats in the 577- seat National Assembly.
Leaders of the G20 association of major industrialized and developing nations meeting in Mexico today will be assessing whether the election outcome in Greece now lifts the threat to the eurozone.
More important than the fate of Greece is whether the markets now feel the threat is lessening of other vulnerable EU economies, especially Ireland, Italy, Spain and Portugal, being forced out of the euro, or even of the euro itself collapsing. Such developments could drag the entire global economy into another recession.
Greek voters were driven back to the polls on Sunday after an election on May 6 failed to produce a government. New Democracy won the most votes in that poll also. But the squabbling among the parties, especially the failure of New Democracy to do a deal with the socialists to form a coalition government, made the whole process futile.
The political parties didn’t have the luxury of hubristic bickering this time.
The express train of bankruptcy is barrelling toward Greece, and the government could run out of money by the end of next month unless the new government reaffirms its commitments to the EU and IMF austerity program.