Yesterday, the centre-right Greek Prime Minister Costas Karamanlis called for an early parliamentary election in a televised announcement. According to Karamanlis, the consequences of the economic crisis were visible, and their resolution required a new popular mandate. Karamanlis is today meeting the president of the republic, Karolos Papoulias, to obtain his backing and agree on a date for holding the polls. He further needs the approval of parliament, where his New Democracy (ND) party holds a thin +1 majority, to get his wish. Things could move very rapidly; according to media reports, a senior government member stated that an election could be held as early as 4 or 11 October.

Writing on the Wall

This situation has been inevitable for the ND party for some time now. Ever since it won with a significant majority in the 2004 parliamentary election, the party has been grappling to make good on its electoral pledges, notably with regards to corruption. Until recently, it could count on strong economic growth rates and increased investment thanks to the hosting of the Olympic Games to paper over the cracks. Yet from 2007 onwards, troubles started to catch up with the government in particular and render its task very difficult. Karamanlis thus decided to hold an early election a year ahead, in order to take the wind out of the sail of the vociferous main party, the Panhellenic Socialist Movement (PASOK). Back then, the main reasons for his decision were very similar to today's: the government's perceived poor response to raging forest fires, corruption scandals in its senior ranks, and the poor security conditions in some of the state's prisons weighed heavily on its record (see Greece: 3 August 2007: Speculation Mounts over Early Elections in Greece).

Two years on, things have taken a turn for the worse in many respects, although not always due to the government's actions. Karamanlis has not improved his ties with the main trade unions; the planned changes of the business-friendly and reform-prone cabinet have been met with almost equal determination and fervour by disgruntled public sector employees in particular; strikes have been a common feature of Greece throughout the tenure, some of them paralysing operations at airports and on roads for several hours at a time. Corruption arguably became most visible in the speculation about the origin of the forest fires, both in 2007 and now (see Greece: 25 August 2009: Greek Capital Threatened by Raging Fires); opposition parties have long been using the link between illegal construction of buildings, the destruction of forests, and resignations of senior government officials in relation to such scandals as a stick with which to beat the cabinet. Nor has the government cut a good figure with regards to reining in the considerable size of the black economy in certain sectors, which is again a side effect of the persistent level of corruption in public affairs. The economic downturn has robbed the government of the trump card it used to dangle in front of its critics. The subsequent largest demonstration of recent years in December 2008, and the fatal shooting of a demonstrator by police officers brought the until then comparatively dormant far-left organisations into the arena, and has resulted in a string of bomb attacks in the main cities (see Greece: 2 September 2009: Bombs Detonated Outside Greek Ministry and Athens Stock Exchange).

Outlook and Implications

Karamanlis may think that attack is the best defence: the ND's popularity rates are lagging behind those of PASOK, and the vociferous PASOK leader George Papandreou has been recently dropping hints at pressing for an early election . According to media reports, PASOK was eyeing a push for a vote of confidence on the cabinet, and early elections in March 2010, by which time the ND would have most likely had even lower backing among key sections of the electorate. Given the gradual deterioration in the ruling party's popularity and the pressing need for popular backing to push through much-needed reforms, Karamanlis may have banked on a snap election before March. This could take the wind out of PASOK's sail yet again after 2007; however, unlike in 2007, it is unlikely to ensure the ND another—narrow—victory. Rather, Karamanlis may aim to reduce PASOK's majority in the incoming parliament, and thus keep his party's considerable clout on policy-making.

Speculations about the composition, economic outlook, and size of the incoming cabinet are rife. Yet regardless of who wins the next polls—and even when, within the coming year—the challenges will remain the same, and so may most solutions, assuming that another centrist party-led cabinet comes to power. Any government will have to forge closer ties with the disgruntled trade unionists, who are exploiting widespread disgruntlement well in order to advance their requests for the expansion of the welfare state and more proportional taxation. The reform plans may be unpopular, but are necessary, and the economic downturn only reinforces their need. Even a centre-left government would have to take unpopular measures to keep the economy going, specifically with regards to the increasing fiscal deficit. Economically, the country is limping heavily, with rising unemployment, and activity in the key tourist sector expected to contract markedly during the year. The incoming cabinet, regardless of its colour, would also need to boost investment, which in return requires business-friendly reforms, for example to the currently rigid labour market. This leaves even a PASOK-led government no option but to join hands with right-wing business associations to lure investors into the country. The terrorist attacks are likely to continue with a centrist cabinet; the terrorist groups are decrying the perceived "capitalist" measures of the government and business-friendly organisations alike. If the next government is going to boost investment, it will need to form a pact with those bodies that the terrorist groups despise. Further, the next government will need to boost the morale of the police force, which has been "enemies of the Greek people" since December 2008 in the eyes of the terrorist organisations. Without the support of the police, the next mass strikes and demonstrations could easily turn very sour for the government.

Papandreou's comment yesterday reveals most what to expect of the next government, regardless of its ideology; he stated that his party had "the strength and the courage to clash with everything that holds [the] country back" (source: Reuters). The same could have been said by Karamanlis, and—given the scope and nature of problems ahead and measures the next cabinet will need to take—this determination may encounter similar challenges.

Global Insight (Reino Unido)