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Greece: Snap Elections and a Leftist Takeover
[Teaser:] A socialist-led Greece could soon find itself in a lonely place, just as its
economic and security challenges are intensifying.
Summary
[TK]
Analysis
The opposition Panhellenic Socialist Movement (PASOK) won snap elections Oct. 4 in
Greece, defeating the ruling New Democracy party of outgoing premier Costas
Karamanlis. PASOK earned nearly 44 percent of the vote, compared to the 34 percent
received by Karamanlis’ center-right party, which was defeated by a wider margin than
pre-election polls had suggested.
The <link nid="145009">snap elections</link> in Greece were held because of the
public’s mounting frustration over the country’s dire economic situation and the
widespread social unrest of recent months. PASOK's stronger-than-expected victory
suggests that the New Democracy party's handling of these problems was unpopular. It
also ushers in a socialist government, led by PASOK chair George Papandreou, that will
inherit a long list of challenges faced by Karamanlis' party that will not easily be
overcome.
Not the least of these challenges is the deteriorating security situation in the country.
There have been regular protests nationwide, many of which have gone beyond the union
labor strikes that are typical in many European countries and <link nid="128731">turned
violent</link>. In the past few months, Greece has seen not one but two <link
nid="144572">deadly fires</link> spread across the countryside and reach ominously
close to Athens, both of which were seen as botched responses by Karamanlis'
government to not handle the matter in an adequate and timely manner.[unclear. do you
mean the fires were botched responses to the Karamanlis government’s mishandling
of the economic problems and social unrest?]
There also has also been a high degree of anarchist activity, with <link
nid="145004">bombs being detonated</link> at critical sites across the country, ranging
from regional government buildings and party offices to the Athens stock exchange. The
nature of anarchist groups, which are opposed to all foreign influences and capitalism in
Greece, suggests that they will not be relieved by a leftist government taking power, and
this means that the chaos of Greece will likely continue.
[Insert graphic of Budget Deficit and Public Debt:
https://clearspace.stratfor.com/docs/DOC-2724]
The new government will indeed be challenged by the state of the Greek economy.
Greece is facing a harrowing 2010 due to the <link nid="139658">impact of the global
economic crisis</link>, which has threatened everything from <link
nid="125633">Greek banking</link> to exports, shipping and tourism. Because of its
chronic macroeconomic vulnerabilities (high public debt and budget deficit), Athens has
to pay a premium on any debt it manages to sell to investors, raising the cost of servicing
the debt. These weak economic fundamentals are not a result of the crisis alone; they
have been high due to years of internal political chaos that has led to cyclical government
overspending.
The question now is whether the new government will be able to cut costs and raise
enough cash in accordance with PASOK's campaign promises. The party has pledged to
inject another 3 billion euro ($4.4 billion) into the economy, which means more
borrowing and raises the question of how Greece will be able to obtain this money given
its weak credit rating. Papendreou has announced that the party's strategy will be to go
after tax dodgers and cut government waste. But there is no real evidence that PASOK
leadership is willing, or even able, to significantly reduce government spending,
especially on social services. There is room for Greece to increase its tax revenue, since
taxes are only 39.5 percent of GDP, but such a move would face serious challenges from
the chronically tax-evasive Greek society.
This means that Greece will largely be limited to private investors to raise the cash its
need for economic recovery, since the likelihood that the European Union will bail them
out has diminished with the socialist victory. Most governments in Europe are ruled by
center-right parties, with all of the major countries, including France, Germany, Italy,
Poland, Sweden and (with its own elections approaching, likely soon to be) the United
Kingdom being led by conservatives. If Athens needs help in addressing its myriad
problems, it is unclear how these center-right governments will come to its aid and to
what degree.
A socialist-led Greece could soon find itself in a lonely place, just as its economic and
security challenges are intensifying.