Greece is to have a general election on May 6th. From the point of view of tackling the problems of the Greek economy, the election is not helpful. It will largely consist of politicians claiming that there is a less painful alternative to the Memorandum of Understanding that the present coalition government has agreed with its euro zone partners, the European Commission, the European Central Bank and the IMF. All the seven or so parties which are not in the current government of national unity but have enough support to be likely to gain parliamentary representation will openly oppose the Memorandum. Antonis Samaras, the leader of the centre-right New Democracy, whose support appears to be slipping in latest opinion polls but is nevertheless likely to emerge as the largest party, will base his campaign on calls to renegotiate aspects of the Memorandum, despite the fact that he has been forced to sign it as part of a temporary government of national unity since November 2011. Only the centre-left Pasok, which for two years from October 2009 to November 2011 imposed a drastic austerity programme, which was the key condition of receiving fiscal support from the EU and IMF, is currently willing to support the Memorandum, without which the Greek state would be bankrupt; and it is likely that during the campaign Pasok campaigners will try to distance themselves from the most unpopular measures being taken, whether salary or pension cuts, or tax rises.
Yet as far as the measures so far enacted which include cuts of 30% or more in salaries and pension, and a range of tax rises affecting all income bands, there is no room for manoeuvre since the Greek state is still running a primary deficit which means it is receiving less in tax than it is paying in salaries and pensions irrespective of the government’s huge debt. A unilateral break with Greece’s creditors would at best force salaries and pensions to be cut further. At worst, it could lead to Greece’s exit from the euro so salaries and pensions would be paid in a new currency, which would be likely to depreciate steeply in value in relation to the euro.
That is not to say that there are no options at all for promoting growth and recovery and Greek parties would be right to debate with Greece’s creditors who are effectively sharing in the running of its economy, on how to achieve a recovery. But if as proposed by ND there should be a cut in company tax with the aim of boosting private investment, the money lost would have to be compensated for by even higher taxes of other kinds. In effect there are no options which can ease the unprecedented economic pain being suffered by Greeks in the short to medium term.
Political parties will therefore be more likely than not to propose policies that if they participate in a government they will not be able to enact, which could lead to an even deeper popular disenchantment on the part of the Greek public with their politicians than already exists.
With 30% of the electorate undecided according to opinion polls, the result of the election is wide open. As noted, ND is likely to be the largest party and Mr Samaras can therefore expect to be asked to try to form a government. He is at present saying that he will not agree to a coalition but as it does not look likely that ND will obtain nearly the approximately 36% of the popular vote which could give it a majority in the 200-seat parliament, he will either have to change his mind or not attempt to form a government. Moreover, despite his insistence on renegotiating the Memorandum prescribing policy guidelines agreed with Greece’s creditors Mr Samaras will probably not want to precipitate the economic chaos which would result from breaking the agreement. This means that only Pasok of the multiple other parties is likely to be a suitable coalition candidate since all the others are completely rejecting the Memorandum. A new ND-Pasok coalition would require that the two parties obtain between them at least 36% of the vote which is more than the Public Issue opinion poll released on April 12th that gave ND 19% and Pasok 14.5%. There is a chance that the Greek public may decide that the options being offered by all the other parties would by resulting in a full break with Greece’s euro zone partners, be in practice even worse than the existing situation and come round to giving the two traditional parties enough support to form a government, despite the fact that they are blamed for the country’s predicament. If they do not it is difficult to see any scenario providing for political stability. It is just possible that three parties to the left of Pasok, the Communists, a coalition called Syriza and the Democratic Left could obtain enough seats to form a government but they are themselves bitterly divided.