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Thursday, June 21, 2012
Tepid vote for Europe in Greece
Greece and Europe have gained some breathing room — but not much — after Sunday's parliamentary elections in Greece. A victory by the conservative New Democracy (ND) party offers hope that the country will support a government that backs the existing austerity program, permitting Greece to stay in the eurozone and preserving the European Union.
Unfortunately, the election results merely offer hope for those outcomes. The vote itself, like the May elections before them, reveals deep divisions that threaten to undermine Greece's future. Moreover, the broader challenge of reconciling national economic policies with regional economic constraints is only more pressing.
Greece first held parliamentary elections in May in an attempt to forge a mandate for a government that could support the EU-International Monetary Fund-imposed package of spending cuts and tax increases that have plunged the country into one of the fiercest economic situations in the postwar era. Greece is now in the fifth year of a recession that is expected to endure for at least another 12 months. The economy contracted at an annual rate of 6.5 percent in the first quarter of 2012, and is expected to shrink 5.0 to 5.3 percent this year. Unemployment is approaching 22 percent.
In the May ballot, ND also prevailed, but running a close second was the leftist Syriza party, which strongly opposes the austerity measures. ND failed to form a government, forcing last weekend's return to the polls. In the more recent vote, ND took 29.7 percent of the vote, topping Syriza, which claimed 27 percent. The socialist PASOK party, ND's traditional rival on the left, won 12.3 percent.
An electoral system quirk gives the winning party a 50-seat bonus. ND and PASOK were expected to form a coalition Wednesday. The coalition would eke out a 162-seat majority in the 300-seat Parliament, thanks to the electoral rule. The Democratic Left, a smaller progressive party, also was expected to join the coalition, giving it 179 seats.
In theory, that should constitute a mandate. Closer scrutiny suggests otherwise. Add the votes of the three coalition partners together, and the tally tops just 48 percent of votes cast. Moreover, nearly 38 percent of eligible voters abstained from the ballot, a number considerably higher than the support of any party.
Voters are understandably suspicious of both ND and PASOK, the two parties that ran the Greek economy into the ground during the 40 years that they have dominated national politics. They are considered corrupt and the authors of the country's current circumstances. They made promises that encouraged the public to live beyond its means, then cooked the books to hide the effects.
Not surprisingly, the last two ballots showed growing support for extremist parties on the right and the left. In addition to Syriza's strong showing, the far-right Golden Dawn party, which uses Nazi salutes and symbols, claimed nearly 7 percent of the vote.
At the same time, however, polls show overwhelming public support for staying in the eurozone. More than 70 percent of respondents want to keep the euro as their currency.
But the terms of staying in the eurozone are hard to swallow. The austerity measures forced on the country by the EU and the IMF as a condition for assistance have forced thousands of businesses to close, halted public services ranging from garbage pickup to hospital, and are encouraging Greeks to migrate out of the country. Greece is broke and the government has no money to pay its bills.
The leader of ND, Mr. Antonis Samaras, wants to create a government of national salvation to serve as "a stable foundation for national unity with a European direction." With that mandate, he hopes to renegotiate the terms of the bailout package, stretching out implementation rather than abrogating the deal completely. To some degree, that is inevitable — the package with the IMF was agreed in March, and since then, the country has faced political uncertainty and virtual ungovernability.
While German Chancellor Angela Merkel, the most strident EU voice in favor of austerity, remains unbending in her commitment to the program, the elections in France have altered European dynamics. New French President Francois Hollande says he seeks a moderation of the hardline economic strategy that has guided European thinking to date. His position has been strengthened by the victory of leftwing forces in French parliamentary elections, also held last weekend. The German foreign minister has hinted at room for compromise, noting that while the substance of the bailout agreement was "not negotiable," the timing issues could be discussed given the campaign delays.
The most telling verdict was passed by European markets, which first rallied on the results, but then lost those gains. Most significantly, yields on Spanish and Italian bonds, two other vulnerable economies, quickly started to rise, topping 7 percent and 6 percent, respectively. Investors anticipate that Greece's problems will spread.
The fact that Europe's politicians continue to think in purely national terms does not inspire confidence that a solution is anywhere on the horizon. Uninspired politicians and a divided electorate are a recipe for stalemate. Greece's vote solved nothing.