May 19, 2024

IHT Rendezvous: Greek Elections: Niki Kitsantonis Answers Readers’ Questions

Supporters of the extreme right Golden Dawn party sit below Greek flags during an election campaign rally in Athens on Monday, June 11.John Kolesidis/ReutersSupporters of the extreme right Golden Dawn party sit below Greek flags during an election campaign rally in Athens on Monday, June 11.

ATHENS — Greece is just days away from a rerun of the elections that failed to give any single party (or group of parties) enough power to form a government. How Greece, the birthplace of Western democracy, votes may have fateful consequences both for this country and for the dozens of countries who use the euro or belong to the European Union, the most ambitious project of free states and free people that this Continent has ever known.

With those historic stakes in mind, you sent us your questions about Sunday’s elections and about Greece as a society and a polity. I’ve done my best to answer those questions here on Rendezvous. Feel free to ask more questions or leave comments in reply to my answers.

And come back on Sunday and tell us what you think of the final election results. In the meantime, you can follow me on Twitter at @NikiKitsantonis.

Thank you for your questions.

David Levner of New York said he saw four possible chain of events based on who wins:

1: Syriza wins, a financial crisis ensues, and Greece stops using the euro.
2: New Democracy and Pasok form a coalition, renegotiate the bailout terms slightly, and Greece continues muddling through.
3: New Democracy and Pasok form a coalition, renegotiate the bailout terms slightly, but Greece runs out of money anyway.
4: The elections are inconclusive again, a financial crisis ensues, and Greece stops using the euro.

Only two things are certain: there is no single dominant political force in Greece and Greece is running out of money.

The fact that no party has a clear lead over its rivals, according to the latest opinion polls, suggests that whoever wins will have to form a coalition, as they were obliged (but failed) to do following last month’s polls. This time, however, the stakes are higher. Not only are the elections being viewed as a referendum on Greece staying in the euro, but state coffers will be empty in July without foreign support, increasing the pressure on politicians to form a government.

In the worst-case scenario, if leaders fail to form a coalition, the president will likely cobble together an ecumenical government, with all parties entering Parliament. It would be a unstable administration but better than the alternative — a void in governance — and could tide Greece through the summer, securing crucial funding. The staying power of such a government would be limited, though, and a third round of elections in the fall would probably be unavoidable.

The hope is that political leaders will rise to the occasion and avert such an outcome, but for this to happen they must forge alliances that they were not willing to forge a few weeks ago.

For the leftist Syriza, which has been riding an anti-austerity wave and has been neck-and-neck with the conservatives in most polls, this will not be easy. The communists have rejected Syriza’s overtures and the other moderate leftist party, Democratic Left, refuses to work with Syriza if it rejects the debt deal outright, which jeopardizes Greece’s place in the euro.

Conservative New Democracy came in first last time, and it has strengthened by joining with the liberal Democratic Alliance and attracting MPs from small right-wing parties. It could form an alliance with Socialist Pasok. These are the two old-guard parties that signed the debt deal. Together, they could attempt to renegotiate some terms with creditors, especially with the euro in the balance.

(Most Greek parties have interpreted the €100-billion loan extended to Spanish banks over the weekend as a sign that Athens could negotiate more favorable terms to its bailout.)

But in view of Pasok’s dwindling support, such a coalition might need the backing of another party, possibly Democratic Left, which last month refused to join a coalition excluding Syriza. If it were to shift its position on Syriza, Democratic Left could be the kingmaker in a new European-focused government that accepts the current debt deal as a basis for renegotiation.

Alec Mally in Athens asks:
Why do the Greeks feel they are above the IMF/Troika policy conditionality required in their bailouts? Portugal is hunkering down. So what is it in the Greek media environment and political culture that has convinced the Greeks that they are somehow “above” the requirements imposed by the Troika and thus able to pick and choose which structural reforms of their decrepit economy and public sector they would implement?

After two years of austerity, most Greeks are running out of patience with reforms, not least because the measures have not had the desired effect of propping up the economy. Due to their failure to make structural reform, Greek politicians fell back on the easy option of austerity — across-the-board cuts to wages and pensions and tax hikes — which provided quick revenue but decimated households and businesses and deepened the recession. This poses a challenge for politicians trying to impose further austerity measures or bring deeper reforms to the system.

Another major problem is the inability of authorities to crack down on widespread tax evasion, worth an estimated €45 billion per year, ranging from the simplest daily transactions (the non-issuance of receipts) to the workings of big businesses.

Lack of political will for reform, always an issue, has deepened ahead of the elections. But political will was not the only barrier faced by the troika. The absence of a functioning public administration to enforce rules was also a key obstacle. Troika officials have indicated that the Greek system is more resistant to change than they had anticipated.

Recently there has been talk, both in Greece and in Europe, about balancing austerity with growth-oriented reform but it has come a bit late for Greece which is in its fifth straight year of recession. Portugal has been more successful in implementing reform but is in its sixth quarter of recession and the measures attached to its bailout were not as harsh as those imposed on Greece. Furthermore, Portugal, like Spain, which has just received €100 billion to prop up its banks, does not have the same debt sustainability problem as Greece.

Mary Cattermole, from San Gregorio, California, said:
I heard that Greek politicians control all jobs through patronage. No one wants what is good for all, only what is good for them and their friends. Euro or no euro, how can you change this culture of corruption?

An entrenched votes-for-favors culture is widely blamed for creating the bloated state that contributed to Greece’s huge debt. However this is gradually changing for two key reasons — first, politicians no longer have the ability to offer special treatment (be it jobs in the public sector or other privileges) due to cutbacks imposed by the troika — which is awaiting the formation of a new Greek government to discuss an additional 11 billion euros in cuts over the next two years. Second, a growing number of Greeks object to this system which they blame for the country’s economic collapse.

Surveys show that a government job is no longer the ambition of most Greek college students, many of whom are keen to pursue their careers abroad.

Since the crisis took hold in Greece, several politicians have criticized the job-for-votes system and corruption in public life, including former socialist Prime Minister George Papandreou who repeatedly highlighted graft as the country’s major problem, and former deputy premier Theodoros Pangalos who stated outright that Greeks use their vote to secure a government job. Until recently those drawing attention to this problem were dismissed as traitors or hypocrites.

A woman kisses the head of Alexis Tsipras, the leader of Syriza, or Radical Left Coalition, during a pre-election rally in Elefsina, Greece.Petros Giannakouris/Associated PressA woman kisses the head of Alexis Tsipras, the leader of Syriza or Radical Left Coalition during a pre-election rally in Elefsina, Greece.

A reader who identifies herself as Anna from the heartland had a number of questions:
Is it true that the shipping industry is exempt from taxation? If this is true, why are they exempt? Are there other industries that are exempt from taxation and why? Is it true that the port of Pireaus was sold to and is currently owned by China? Does China pay taxes to Greece for its use?

Greece’s shipping sector, one of the country’s few healthy ones, accounts for about seven percent of GDP and eight percent of the world’s fleets with more than 3,000 vessels. It pays a discounted tax rate but is not exempt. Shipping companies pay tonnage and port taxes but are exempt from income tax and tax on profits. There has not been much talk of imposing additional taxes on shipping firms, mostly out of fear that they would join the majority of large Greek companies in relocating elsewhere. Authorities are loath to alienate shippers as they are the country’s largest foreign exchange earners, bringing in €13 billion in foreign exchange in 2010, and major investors in real estate, banking, tourism and the media.

The involvement of the Chinese firm Cosco in the country’s main port of Piraeus, near Athens, is one of the few examples of a foreign investment in a state-owned asset in Greece to take off, despite political and union opposition. Cosco has signed a 35-year lease to operate one of the two cargo terminals at the port, and build a third, and is subject to the same tax and customs charges as other shipping companies.

Apart from shipping, there are few other sectors that enjoy favorable tax treatment. Tourism, one of Greece’s largest industries, accounts for a fifth of GDP and one in five jobs, and benefited from a reduction of the value added tax on accommodation (to 6.5 percent from 13 percent) in 2010 but the increase in VAT on food served at restaurants and hotels (to 23 percent from 13 percent) last year as part of troika-imposed reforms has offset any benefits from the earlier tax break. Anti-austerity rallies that turn violent and other bad press have led to a drop in foreign visitors which, tourist professionals say, could finish them off.

Alan from Paris asks:
Is there any hope that after the new election we will see a relaxation of the anti-competitive regulation strangling growth in Greece? The limits on the hours businesses can open, etc?

The troika has had little success in liberalizing dozens of so-called “closed professions,” ranging from taxi drivers to pharmacists, that are protected by guilds that obstruct newcomers and have strenuously opposed reforms. Economists had estimated that opening these sectors could increase GDP by 10 percent in five years. But, with the deeper-than-expected recession (taxi drivers have seen a major slump in business, truck drivers have fewer deliveries, etc.), some argue that even if these areas were liberalized, new entrants would have few prospects.

Opening hours for businesses vary in different areas, with shops in tourist areas often opening all day. Talks on launching trade on Sundays and Monday and Wednesday afternoons, when many Greek businesses traditionally close, failed to progress due to opposition by employers’ unions. The biggest problem is that reduced consumer power has crippled business activity, a problem that longer opening hours would likely not solve.

Reminore in New York asks:
What is the possibility of a military coup of “national salvation”?

There has been isolated speculation about such a prospect but no indication that this could happen. Abhorrence to the military dictatorship of the late ’60s and early ’70s is embedded in the psyche of Greeks, even those who did not experience the repressive regime firsthand, so it is almost inconceivable that such action would be taken. There is no social or political foundation to support it. In the event that the current social discontent swells to the point of civil unrest — in the case of a euro exit and subsequent shortages of basic imported goods such as fuel, food and medicine, for example — it is likely that the political class would pull together rather than leave a void in governance that could provoke unpredictable developments.

AK from NYC asks:
I am currently visiting friends in Greece. The impression I get is one of resigned exasperation: they don’t want the leftists or the extreme right to win, but they also see no future in the current path. I’ve heard from many that, under the current (EU/IMF-dictated) austerity path, they are bound to lose their jobs and homes within the next year or two. They feel they have nothing to lose by voting for those that will likely take them out of the euro and possibly the E.U., since the current path is (as they see it) guaranteed disaster. Very depressing, really.

It is true that there is a general sense of exasperation among many Greeks. Living standards have been slashed, most who still have a job work more hours for less pay, and always in fear of layoffs, hopes for a decent pension are gone and many are struggling to keep up the mortgage payments on their homes. The sense among many is that the rescue funding is going toward paying interest on Greece’s rescue loans and to supporting banks. Similar exasperation, and anti-austerity protests, have been seen in other countries across the world, not just those obliged to seek foreign bailouts, with the Occupy movement expressing some of this frustration and, often, solidarity with Greeks.

In Greece, the resentment has been reflected to a certain extent in opinion polls showing support for parties at the extremes of the political spectrum, although support for the far-right has ebbed recently. But opinion polls also consistently show that 8 in 10 Greeks want to stay in the euro. Surveys also indicate that a majority of Greeks want a coalition government as they do not have faith in one particular party to lead them out of the crisis. A significant majority, it seems, will vote for the pro-bailout conservatives, who appear to be making a comeback, and for leftist Syriza, which has indicated it will reject the bailout. But a large pool of voters, up to 20 percent, remain undecided. It is likely that many of these will come out to vote on June 17. Whether they will go for the “devil they know” and continue following the bailout path in the hope that renegotiated terms might offer a ray of hope or whether they will support an untested leftist whose tactics might lead to a euro exit that he insists he does not want remains unclear.

Greenmountain Boy in Burlington, Vermont asks:
Now that the Greeks have had their chance to vent, do you see any swing back from the extremes to the more centrist parties that could actually form a working government or will the elections result in another muddle?

The most recent opinion polls indicated that there was indeed a swing back from some of the extreme parties, particularly far-right Golden Dawn which drew 7 percent on May 6 and was most recently polling at around 4 percent. Polls also showed that 6 out of 10 of those who voted for Golden Dawn on May 6 did so out of protest, not because they agree with the party’s ideology. The recent assault by the party’s spokesman on two female leftist candidates during a live TV debate could erode its support even further.

Meanwhile, the radical left party, Syriza, which came in a surprise second in last month’s elections, has been rising ever since, it seems, and the latest polls put it neck-and-neck with the conservatives, the winner of May 6 polls. Although there is much debate about the possible risk posed by Syriza, it appears to be maintaining its momentum as public opposition to austerity is still strong.

Still, many Greeks are unsettled by Syriza’s game of chicken with the troika and may heed foreign warnings about the dire repercussions of a possible Greek exit from the euro. Anecdotal evidence suggests that a growing number of Greeks, particularly from the center and center-left, are considering sacrificing personal ideology to support conservative New Democracy as the only “guarantee” of further foreign aid and eurozone membership and to ensure Syriza is kept out of power.

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