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12 Mar 2012 10:17
The opening shots in Greece’s next general election campaign were fired on Sunday, threatening to push the European debt crisis into a new period of uncertainty.
Just two days after Athens executed the largest single debt restructuring in history, Antonis Samaras, head of the right-wing New Democracy (ND) party, criticised the terms of the country’s second aid package in a speech seen as the clearest signal yet that an election is close.
In remarks that could unnerve Brussels, Samaras hit out at the austerity measures demanded by the European Union (EU) and the International Monetary Fund (IMF), saying: “To make the debt cut work, we voted for things we disagree with.”
Samaras insisted a coalition government could not implement economic reforms within Greece, even though no party appeared popular enough to win an overall majority.
“I cannot change things if I need to step on the delicate balance of a ramshackle coalition,” Samaras told ND’s political committee. “I want my hands free so the country can get back to its feet.” He also indicated Greece could go to the polls before the end of April.
Opinion polls show ND and the socialist Pasok party have shed support to more extremist parties at either end of the political spectrum.
Raoul Ruparel, head of economic research at think-tank Open Europe, said neither ND nor Pasok is likely to win a majority on its own.
“Not only does this dampen hopes for more effective governance in Greece over the next few years but it raises significant questions over the long-term viability of the latest bailout agreement between Greece and the rest of the eurozone,” he warned.
“It wouldn’t be surprising to see the new government attempting to renegotiate some, if not all, aspects of the package ...
that is precisely why suggestions that this package offers a clear solution to Greek woes are premature,” he said.
Greece’s government, headed by Lucas Papademos, has not announced when a general election will take place.
Evangelos Venizelos, the finance minister, is expected to become the next leader of Pasok after leadership elections next weekend. On Saturday, he was splattered with yoghurt by a 70-year-old man brandishing a walking stick, making him the latest Greek politician to experience “yaourtoma”. After changing his clothes, Venizelos admitted Pasok, which governed from October 2009 to November 2011, must offer “a big, honest apology for our errors and omissions”.
Some European leaders would rather the Greek elections were postponed. On Sunday Germany’s finance minister, Wolfgang Schäuble, praised Italy’s “smart” decision to stick with an unelected leader—Mario Monti—until 2013.
While Greek leaders turn their attention to the ballot box, investors are digesting the dramatic events of last Friday when Greece cut more than €100-billion from its debt pile, a move officially defined as a “credit event”. This means credit default swaps sold against its bond will be triggered, although this is not expected to cause panic.
The new Greek bonds handed to creditors as part of the debt swap will start trading on Monday. Those securities have already been trading in the “grey market”, where they changed hands at significant discounts to their face value. That, analysts fear, indicates Athens will need a third financial aid package.
“Writing off more than €100-billion of debt can only help Greece but it is probably not enough to get its debt back onto a sustainable path,” warned Gary Jenkins of Swordfish Research. “What the EU is really doing is buying time for the other troubled European sovereigns to get their houses in order.”—
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