domingo, 20 de setembro de 2015

Greece faces hard-choice election


Greece faces hard-choice election
By MATTHEW KARNITSCHNIG 9/20/15, 12:45 AM CET Updated 9/20/15, 6:22 AM

ATHENS — As crisis-weary Greeks head to the polls on Sunday for an election many dismiss as pointless, the key question isn’t who wins, but whether the next government can stay in power long enough to overhaul its broken economy and release crucial bailout funds.

Europe has a lot riding on the answer.

The EU is counting on the new government to stick to the terms of Greece’s latest bailout, an €86 billion package agreed in July after months of contentious talks that took the country to the brink of leaving the euro.

But accepting that hugely unpopular program hasn’t done anything to end Greece’s growing political instability. The country used to hold elections every three-to-four years, but Sunday’s poll is the fourth in three years.

With Greece heading into its eighth year of recession, unemployment forecast to rise and the people as disillusioned as ever, it’s unclear what will halt the political upheaval. If the next government proves as short-lived as its recent predecessors, the prospects for Greece’s future in the euro are dim.

And yet the consensus view, both in Greece and Europe’s capitals, is that Sunday’s election is largely irrelevant. Whatever coalition emerges, the argument goes, it will have no choice but to implement the terms of the bailout.

“There is no other alternative but to rebuild confidence and the only way you can do that is to stick to the path of the program,” said George Pagoulatos, a professor of politics and economics at Athens University of Economics and Business and a former government adviser.

At issue is the same thicket of creditor-imposed economic overhauls to the pension system, labor market and public sector that sent thousands of Greeks onto the barricades in recent years.

It was a dispute over those very same issues that led to Sunday’s election. Alexis Tsipras, faced with a rebellion in his leftist Syriza party over his decision to accept Europe’s stiff terms for the bailout, called the vote last month, capping a rocky seven months as prime minister.

Just weeks earlier, he held a controversial referendum on the bailout plan. Though almost two-thirds of Greeks rejected the terms, he struck a deal with the country’s creditors anyway to keep Greece in the euro.

Pagoulatos said the dramatic events of the summer, including the introduction of capital controls that remain in effect, amounted to a “near death experience” for the country that showed Greeks they had no alternative but to accept the reforms if they want to remain members of the common currency.

“It was a moment of clarity,” he said.

Syriza’s next steps

Still, it’s far from certain that Tsipras will stick to the agreement with Europe if he’s reelected.

Syriza surged to power in January on a promise to reverse the public spending cuts at the center of the debate. Tsipras’ decision to impose even deeper cuts has left many of the party’s supporters disillusioned and prompted a group of far-left MPs to break away and form a new party.

“I don’t see things going smoothly,” said Yannis Koutsomitis, a Greek political analyst. “There’s a question about how his MPs will react once they have to vote on the reforms.”

A block of Syriza lawmakers skeptical of the reforms has already been urging him to push to water down the agreement. On Friday, Tsipras told Greek television that he would press for relief of Greece’s crushing debt burden.

Polls published last week showed a dead heat for first place between the left-wing Syriza movement and the center-right New Democracy with a collection of smaller parties, including pro-European centrist forces, vying for third.

For the bailout to go forward, the new government would have to immediately set about enacting a slew of reforms in coming weeks. Only then would creditors release further aid.

If Athens delays, it could also jeopardize a planned €15 billion recapitalization of its banks. The recapitalization would pave the way to begin lifting capital controls.

If the recapitalization is delayed until next year, however, new regulatory rules requiring a so-called bail-in of depositors would apply to the banks. In Greece’s case, that would wipe out many small businesses that count as the banks’ main depositors.

If Syriza wins, the outlook for reform will largely rest on the party’s coalition partner − Tsipras has ruled out forming a coalition with New Democracy. If the party goes into coalition with a pro-European party, the chances the bailout program will go forward are greater than if renews its coalition with the nationalist Independent Greeks, analysts say. The latest polls suggest the nationalist party may not garner the 3 percent of votes needed to enter parliament, however.

If Syriza loses to New Democracy, the bailout could be even more at risk.

Though New Democracy has committed to adhere to the agreement, Syriza might decide to agitate against it from the opposition.


“It can’t be ruled out that he does another mea culpa and changes course,” Pagoulatos said. “Anyone who has tried to look ahead and predict Tsipras’ next steps has failed spectacularly.”

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