Under mounting pressure from euro zone partners, Greece is scrambling to deliver on reforms and fiscal targets to avoid bankruptcy but its efforts seem doomed and snap elections are on the horizon. A chronically inefficient public sector, persistent corruption and cantankerous labour unions have thwarted progress in the year and a half since Athens secured its first, 110 billion euro bailout in exchange for tough austerity measures and structural changes. EU partners are losing patience and the government’s popularity is sinking as deficits grow instead of shrink amid a deepening recession. The public, fed up with austerity, is demanding change. “We have wasted the last year and half,” said Costas Panagopoulos, head of the ALCO pollsters. “It is clear the government will miss its fiscal targets and it can’t impose extra measures. It’s a complete dead end.”
Prime Minister George Papandreou is expected to trumpet reforms at an annual economic policy speech in the northern Greek city of Thessaloniki this weekend but analysts say new pledges will do little to brighten the gloom. “I expect nothing from Papandreou’s speech,” Panagopoulos said. “To avoid bankruptcy, you need a magic wand to fix what hasn’t been fixed in the last two years.” EU partners may find a compromise for now so Athens can get the next bailout tranche and avert a messy Greek collapse that could bring down the euro. But Germany, the main bankroller of Greek bailouts, made clear on Thursday that Athens needed to fulfill conditions to stay in the common currency bloc.
Analysts say a Greek default or even an exit from the euro down the line is now a real risk unless a sea change of reforms take place, despite vehement denials by Athens.
RACING TO CATCH UP
Papandreou, who won elections in 2009 on tax and spend pledges, seems to have assigned all economic matters to his new Finance Minister, Evangelos Venizelos, who is racing to catch up after 18 months of foot dragging on issues from tax collecting to privatisations.
Venizelos is also tasked with keeping rebellious socialist MPs in line, negotiating with the “troika” of EU and IMF inspectors and euro zone partners on fleshing out a second, 109 billion euro bailout clinched in July but complicated by demands for collateral. “Instead of a coach, we have a referee,” said an economist who requested anonymity. “Papandreou has dumped it all on Venizelos. During the disastrous troika negotiations in Athens, the prime minister was attending a Libya conference in Paris.”
A cabinet meeting this week – those who attended described it as “dramatic” – decided to redouble efforts on a long list of measures, after the inspectors suspended a visit last week to give the embattled Socialists time to ramp up fiscal measures. But analysts said most were steps Greece had announced before and which had met resistance from within the party. Even after the latest alarm bell, some MPs and ministers were defensive of government policies.
“There are delays but we have been asked to change things entrenched for decades in a few months. There is a huge social problem and a problem with the real economy. These decisions are costly,” said a cabinet member on condition of anonymity.
TRICKING THE TROIKA
Internal resistance has been Greece’s doom, analysts say. A clientelistic public sector fostered by successive governments for decades and unions spoiled by their political party patrons have fought reforms tooth and nail.
“With few exceptions, ministers never believed in the need for reforms. They played hide-and-seek with the troika, undermining, delaying and often tricking the troika,” wrote Alexis Papahelas in the conservative Kathimerini daily.
“For the first time, I’m afraid that those who say that we need to crash in order to change, will be proven right.”
Negotiations with international lenders have stumbled on disagreements over reforms and by how much and why Greece will miss fiscal targets. Athens blames overshooting its budget deficit on a worse-than-expected recession, but the troika says that is only part of the problem and wants real change fast.
Snap elections, long seen as disastrous for a country in the midst of its worse crisis since World War II, are now viewed by some analysts as a possible way out as the main conservative New Democracy opposition gains ground.
With no outright winner expected, New Democracy may garner just enough support to force a repeat vote immediately rather than form part of a coalition that will waver for months. Elections are not due before Autumn 2013.
Analysts say snap elections may also soothe public tensions, giving a way out to a public angry with austerity that has taken to the streets in violent protests before the summer.
“I don’t think snap elections would resolve all things but I am beginning to believe they might be a solution, if only to get a government that can govern,” Panagopoulos said.