Greece’s other imminent crisis

Could politics in Greece prove even more dangerous than its economics?
Takis S Pappas
16 May 2011

It is already a year after Greece was forced to seek a bailout from its fellow euro partners and the IMF but the outlook seems no brighter than before. Despite the Socialist Government’s great efforts, accomplishments have in general fallen short of expectations. Greece’s budget deficit in 2010 was 10.5 percent of GDP, which is 1.1 percentage points higher than forecast. During the same year, total government debt stood at 142.8 percent, the highest in the EU. As the fiscal figures continue coming in worse than planned, and amidst fears of deepening recession, further pressure builds in Greece to raise taxes and cut spending to meet its targets. As the country finds it increasingly difficult to put its finances in order, investors become increasingly skeptical about the government’s ability to avoid restructuring Greece’s debt.

Why has the Greek government failed to meet its deficit targets despite all efforts? There are four reasons for that, which, interestingly, are related to politics rather than economics. Jointly, they not only undermine the government’s present effort to reduce deficits and spur development but also threaten to lead the country in the future into an even more dramatic crisis of governability.

The first aspect that hinders the Greek government’s efforts to tackle the economic crisis is that it lacks the necessary legitimacy for implementing the programme imposed on it after bailout. It has failed to win the consensus of major social partners, such as the labour unions, or key social groups, including the liberal professions, the pensioners, and even the youth. Not only have demonstrations against the government’s measures become an almost daily phenomenon in Athens and other Greek towns, but they often turn violent and involve clashes with the police. No wonder, then, that, within only fifteen months, support for the government has shrunk from a poor 34.7 percent to an oppressive 21.5 percent.

Another factor that thwarts the government’s efforts is that it lacks sufficient political credibility to enable it convincingly to carry out an economic rescue programme, and that is for three reasons. Firstly, as many of the government’s members, including Prime Minister George Papandreou, have served in previous Socialist cabinets, they bear the brunt of having contributed to the crisis. Secondly, the government is anything but resolutely united behind a strong-willed prime minister; instead, many incidents of internal tensions, squabbles, and growing dissent inside their ranks have leaked out. Nor can the prime minister rely for support on the erstwhile strong PASOK party mechanism, moreover, which now seems to have vanished into thin air.

A third major inconvenience for the Government is that it lacks an opposition with potential to provide fresh ideas, constructive criticism, and even tacit support for the most urgent measures. The main opposition party, conservative New Democracy, has in general stood out against the bailout package but, lacking credibility itself, has no alternative solutions to offer. On the other side of the political spectrum stand two parties of the extreme left, the Communist Party and the Coalition of the Radical Left, that oppose the government in forceful but often systemically disloyal ways. With a combined current strength of around 15 percent, but likely to rise, these parties are intent on thriving on collective frustration, social discontent, and insecurity.

The fourth obstacle to the Greek Government’s effort in carrying out its economic rescue programme is that it lacks law-enforcement capacity. The torrent of new legislation voted in by parliament over recent months will come to nothing if the government cannot really apply it. Law-enforcement, though, is becoming increasingly difficult. A general smoking ban in public areas has not been fully respected despite hefty fines set for offenders. Works on a planned landfill site in the town of Keratea caused locals to clash with the authorities for 126 days until the latter decided to withdraw their riot police from the site. Other citizens thumb their noses at authority by organizing movements that refuse to pay highway tolls and public transport tickets and still others systematically destroy public property without punishment. And so on.

Given these difficulties, it would be reasonable, perhaps, to provoke elections, thus procuring a new government with a fresh mandate. But, as most people in Greece seem to believe, neither a strong government nor a thorough mandate are for the moment real possibilities. The fear is, instead, that, as long as the Greek economy cannot get out of its vicious cycle, in order to be able to decrease deficits while increasing competitiveness, the country may be heading towards a major crisis of ungovernability with unpredictable consequences. The signs of law evasion, rioting, extreme social polarization, and generalized anomie that indicate a seriously pathogenic political system are too many and too frequent to simply dismiss as ephemeral.

Getting Greek politics back on track is therefore no less a priority than getting economic reforms right. This will not happen, however, as there exists no firm leadership, able to apply a realistic plan of long-term action that will be endorsed by Greece’s social majority. As has so often occurred in history, such leaders tend to emerge after the occurrence of major crises and when no obvious alternatives seem to exist. Greece is already experiencing a grave economic crisis. Yet, it will be very lucky indeed if some determined and resourceful leadership emerges  before the political crisis that lies not far ahead explodes.

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