Monday, 19 March 2012

Greek Political Risk

Many non Greek observers and analysts have shifted their interest into the next day of the forthcoming Elections. Although not yet known when, it is widely reported that Elections will take place no later than early May. Technically, the declaration of a General Election has to be at least three weeks in advance.
What many feel is at risk is the determination of the Greek political spectrum to go ahead adhering to the Program needs (M.O.U. or “Μνημόνιο” in Greek) in light of a massive popular opposition to further belt tightening and a widely televised social unrest.
It is a fact that the perception of the average non Greek about Greece, the situation on the streets, is distorted by non symmetric news coverage. The word Greece in the media is usually followed by an “archive” video or by AP/Reuters, etc.  photos of demonstrators throwing Molotov cocktails at police, angry mobs et. al. In every presentation and/or conference you hear and see strategists, economists and analysts commenting on the social unrest in Athens (followed by a similar photo, etc.).
My favourite one.
However, things are not like this at all. Considering the effects of the internal devaluation imposed on the working and the middle classes’ incomes, Greeks have generally behaved with unprecedented constraint and calm. Athens is not in ruins and not every demonstration is like this. The angry mobs depicted in the news-reports are usually comprised of small groups of non-political self proclaimed anti-authoritarian sects that operate independently and are not supported by public opinion at large. Still, what is ignored is the fact that demonstrations, even the big ones, involve less than 1-2% of the population and acts of violence are committed by less than 1% of those, much less and in rare occasions
Therefore, coming back to the question at hand, the day after is less of a risk factor for Greece’s future. The outcome of the next Elections is, more or less, going to be a coalition government amongst pro-European parties (old and/or new). Most Greeks see Greece’s future in the Eurozone and feel that most of the structural reforms are right and should happen. Even some of the moderate left parties proclaim that. The devil is in the details of course but since most parties appearing in the polls these days have no election history or any history at all, those outcomes cannot really be analysed.
It is a fact that the prevailing trend in the polls is to deprive the traditional powers of New Democracy (conservative/right) and PASOK (social democrats) their universal strength (that is their ability to gather votes from across the spectrum). That is not so bad, after all, considering that those two political super-powers trough their mechanisms and ties to the public sector unions are predominantly responsible for the misfortunes of modern Greece. Party member favouritism, special group interests and public sector corruption thrived during the time of their dominance. A breakaway from the single party government tradition can be a positive development for Greece and the Greeks as exhibited by the Papademos led government.
It is also a fact that the left is on the rise, mostly out of the ranks of the centre left/social democrats that currently lack conclusive leadership and are penalised (PASOK) for failing to proactively manage the crisis and protect social welfare. However, most of the breakaway parties formed recently cannot act as catalysts in any outcome as their new found shine will eventually fade as days go by and reality takes charge.
A multi party Parliament and an eventual pro-Euro coalition government will help defuse the pressure of special interest groups and unions. In such an environment, the “technical” assistance from the Troika can eventually act as a catalyst for reform, as briefly evidenced during the Papademos government.
That is why, this time around, a non clear majority vote is an opportunity and not a threat.

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