Political Tumult in Greece After Uncertain Elections

(…..) On Sunday, traditionally dominant parties, New Democracy and Socialists, which both backed Greece’s latest loan agreement with its foreign creditors, failed to get enough votes for a majority in Parliament. Several smaller parties, whose fortunes rose on a rich harvest of protest votes, refused to join in a coalition with larger parties. “We did everything we could but it just wasn’t possible,” the leader of New Democracy, Antonis Samaras, said in a televised statement after failing to secure support from other political parties. Greek law gives the front-runner 3 days to form a government before the baton is passed to the runner-up. The political uncertainty injects a new element of unpredictability into eurozone crisis, possibly casting Greece’s loan agreement with its foreign creditors into doubt, with a requirement pending to cut $15 billion from the budget in June. With the likelihood that a fiercely anti-austerity crowd will dominate next Greek Parliament, some investors think it is only a matter of time before the country reneges on the promises it made of deep spending cuts and higher taxes to secure the bailout. That, financial experts say, could have repercussions far beyond the deceptive serenity of Greece’s olive groves and azure waters. “Greece is lurking as a problem, not so much because it could leave euro and tear things apart, but because it could before that default and trigger financial events that could cause the crisis to spread”, said Carl Weinberg, chief economist at High Frequency Economics, a financial research group in Valhalla, N.Y. Just months after the biggest debt write-down in history, a default could come as soon as August, when Greece’s creditors are to decide on whether to release another installment of financial aid. That would lead to problems at the European Central Bank and the International Monetary Fund, which are using taxpayer money to foot most of the bill for the bailout. Other countries that lent directly to Greece would also face steep losses, including Spain, which many analysts believe may need a financial bailout of its own. With the Spanish economy suffering in a deepening recession, unemployment near 25% and rising borrowing costs, any credit event in Greece may make investors wary of continuing to lend to Spain. At the extreme, analysts worry that a Greek default might also hurt Germany and France, which are on the hook for a large portion of the bailout bill. “If that does happen, then the fiscal problems will spread to countries that are not seen as being in trouble now,” including these, Weinberg said. Although Germany is still the strongest economy in eurozone, a handful of influential hedge funds, including one run by the Wall Street investor John A. Paulson, have started to bet against Germany and “core” of strong wealthy northern countries in the eurozone, with the view that the crisis will become more serious and spread further. For Greece, the election results marked the end of a political era for Socialists and New Democracy (…..)

Link: http://www.nytimes.com/2012/05/08/world/europe/greece-in-chaos-faces-possible-new-elections.html

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Consultor Internacional

2 Responses to Political Tumult in Greece After Uncertain Elections

  1. Professor Uziel Nogueira says: Greece is going to make history sooner than many people think possible. Perhaps, Greeks may opt out to leave the euro zone after the new political party takes over. Austerity without end is the only certainty offered by the bailout program. For many Greeks, the return of the Drachma sounds like the only solution. If Greece leaves the common currency, a domino effect will follow soon. Some countries may be tempted to follow the Greeks while others will stick with austerity and stay put. The European financial system, already shaken by bad real state loans and public debt, will suffer another blow. European anemic economic growth stalls an turn into a deep recession. Trade and financial linkages at global level will take a toll on world economic growth. The economies of BRICS, the only engine of world growth lose momentum and slow down. In sum, the Greek economic tragedy is still alive and playing in the central stage. Like ancient Greek plays, the ending is never happy.

    http://www.nytimes.com/2012/05/08/world/europe/greece-in-chaos-faces-possible-new-elections.html?pagewanted=1

  2. It has become fashionable recently to associate electoral losses of the centre-left, particularly in Europe, with the charge that they are hamemorrhaging votes because they have lost the battle of ideas to the right. Former foreign secretary, David Miliband, articulated this position in a major speech to the LSE last year: … the European Left is losing elections on an unprecedented scale because it has lost control of the political agenda to a newly flexible right … it has not responded to changes in economy and society; and that to turn things round it needs to address both its deficit in ideas and organisation. This analysis begs the obvious question about how we should understand the victory yesterday in the French Presidential election for François Hollande. Have voters in France conspicuously rejected the ideology of the right in favour of a more avowedly socialist programme? Tempting as it is to interpret swings in the electoral fortunes of the left or the right as being powered by voters’ judgments on the policies and ideas of the different parties, the reality may be somewhat more prosaic. Rather than witnessing any shift in the underlying preferences of voters, today’s electorates might be better understood as being disgruntled with governments’ – of all political persuasion – failure to protect and improve their living standards, or respond to their anxieties and concerns. This at least is the view of leading US political scientist, Larry Bartels. In his forthcoming essay for IPPR’s new politics journal – Juncture – Bartels analyses the outcome of 31 elections that have taken place during and after the Great Recession, and suggests that contrary to some pessimistic voices on the left – there is “remarkably little evidence of any systematic electoral shift among voters to right-wing parties.” Instead he offers the following explanation for understanding recent voting behaviour: [Great Recession] election outcomes have provided little evidence of meaningful judgments on ideologies or policies, and a good deal of evidence suggesting that voters have simply, and even simple-mindedly, punished incumbents of every stripe for hard times. His proposition is that if you want to understand who will win an election you can do worse than look at levels of economic growth in the two year period – and particularly the final year – before the election. Of course there are a myriad of other factors at play – voters’ views on the charisma and competence of different leaders for instance – but nevertheless he finds a strong positive relationship between economic growth and incumbent vote shares, as set out in the figure below (…..)

    http://www.newstatesman.com/blogs/politics/2012/05/europe-hasnt-swung-right-or-left

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