Greece: What Lies Ahead?

The water-thin majority in the latest re-election process of bringing New Democracy to power or a coalition government in Greece is not sufficient to give a touch of buoyancy to the global markets in the long term. In the first round of the polls held on May 6, Greek voters were indecisive while in the re-election held last Sunday, New Democracy won 29.7 per cent of the vote, ahead of the Syriza Bloc at 27 per cent and Pasok at 12.3 per cent.

With New Democracy taking a 50-seat bonus under the Greek electoral law for coming first, a New Democracy-Pasok alliance would have 162 seats, a majority in the 300-seat parliament. Democratic Left’s leader, Fotis Kouvelis, is willing to support the leader of New Democracy, Antonis Samaras, with a few conditions. Adding the Democratic Left would give it 179 seats. According to a New Democracy source, Samaras has received a mandate from the president to form a coalition government after Samaras met the third-placed Pasok socialists and the small Democratic Left group.

A brief relief rally has seen in the international financial markets after last Sunday’s Greek poll results. Now it is clear that Samaras has failed to win a majority to implement the deep-spending cuts and tax increases conditioned by the European Union and the International Monetary Fund (IMF). However, Samaras, a US-educated economist, has to ride ahead on a difficult road. His government has to rule a country with an economy in its fifth year of recession. In Greece unemployment is at 21.7 per cent. Credit flow has dried up for businesses as Greek banks struggle and international lenders shy to lend the money due to uncertainty. The previous government had announced money sufficiency only till July 20.

Meanwhile, Samaras has provided an assurance that the new Greece government would aim to meet its commitments for the bailout and save the country from bankruptcy and an exit from the euro zone. However, continuing with the euro zone will lead to a drastic reduction in wages and pensions along with increased unemployment. Contradictory to this, many economists also recommend Greece to exit the euro zone and devalue its own currency against the other currencies that are increasing its competitiveness.