No rush for snap elections in Greece
by Alberto Paez and Martin Foehler (October 6, 2016)
In the coming couple of years the Greek government and the creditors should focus on how to transfer a steady economic performance amid austerity into production, improvement of employment rates and sustainable growth so that the business sector can start recovering and tax rate can lower or be better adjusted. Prerequisite for such a development is for creditors to conclude with the concretization of debt relief short- and mid-term measures (read our latest analysis here), lower primary surplus targets after 2018, include Greek bonds in ECB’s quantitative easing, strengthen public investments and better absorb EU’s structural funds.
Towards that end, Greece’s creditors should re-consider their policy in the labour market and the handling of non-performing loans (NPLs), especially those ones connected with the primary residence. On its side, the Greek government and the relevant financial authorities, in close cooperation with the banking institutions and municipalities, should do whatever is necessary to tackle foresclosures on mortgage and business loans for holders that are protected by the law. All these actions are fundamental towards maintaining social peace in Greece in the long run.
The political environment
All our 2016 polls suggest that social grievances have been increased after the implementation of the third memorandum, but at the same time the overwhelming majority is negative to a snap elections scenario.
Front opposition ND party has been calling for snap elections since the beginning of this year, but the party still misses to capitalize on these grievances and drag support from undecided voters. Moreover, ND is lagging behind Syriza in all polls, failing to convince that they have an alternative economic policy model or plan to exit the crisis faster. Political scandals and mounting corruption cases are also among the most serious drawbacks that ND leader Mitsotakis and his party carry on their shoulders. Therefore, the pressure against the government to move on to elections is simply an effort to push PM Tsipras make a strategic mistake and create conditions of political chaos through which ND foresees to increase its electoral appeal.
Furthermore, the business world, once strongly opposed to the left-wing Greek government, starts fostering a common front against the pressure exerted by the creditors that aim at further de-regulating the domestic market and overcoming the binding acquis communautaire in the EU labour law. Already that the labour market has been strongly hit by recession, so-called flexible working conditions and unemployment, there is an orchestrated effort to convince the creditors that further deterioration would by costly for every side involved.
The Greek government is stable despite the huge financial burdens. Many things have to change with respect to the faster and more efficient implementation of reforms and the government agenda. This might take a cabinet reshuffle or a deeper commitment by a number of Ministries and their respective executive and communication bodies.
Alberto Paez and Martin Foehler are Policy Analysts at Bridging Europe
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