December 18, 2014

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Not looking good for Samaras

The Greek government got only 160 votes in the first round of voting yesterday, slightly less than the minimum anticipated. The government had hoped to gain 161 to 167 votes in the first round to build up momentum towards the third round December 29, when only 180 votes are required to approve the presidential candidate. There were some surprises yesterday, including the decision by independent Panayiotis Melas to vote “present” rather than backing Dimas, though Melas later suggested he might change his stance in the coming votes, Kathimerini reports.

Five independents and three Democratic Left MPs now started an initiative to secure a cross-party consensus for a president in return for setting an election date later next year, and it looks like this initiative could gain momentum over the next days.

The government also tried to reach out to the opposition party. Evangelos Venizelos met with his MPs ahead of the vote and suggested that the government would be open to concessions for the opposition. He suggested, for instance, in return for backing the presidential candidate, Syriza could get representation on a Greek team to negotiate with the troika.

Syriza leader Alexis Tsipras said the government's "strategy of fear" had collapsed. "Democracy cannot be blackmailed," he told reporters after the vote. A second round of voting will be held on Dec. 23 and a final round on Dec. 29. 

Jan Strupczewsk on Reuters writes that the biggest fallout of this crisis is not so much financial, but political. What we are likely to see is rising support for militant political parties rather than rising borrowing costs, he writes. This situation is far different from 2010. Almost 90% of Greek public debt is now held by official creditors, another haircut on private bondholders is unlikely. There is an ESM and the ECB with its still potent promise to do "whatever it takes." If there are snap elections with Syriza winning an outright majority, it will have the mandate to press ahead with its demands for debt write-offs, which would put the eurozone in an impossible position with other debtors. While EU officials and economists believe Syriza's radical slogans may mellow if it comes to power, its victory would still be a boost to like-minded Eurosceptics of far left and right across Europe. An election victory of Syriza could add to the popularity of extremist parties all over Europe, with more fundamental discussions about the policy mix but also higher risk of bad policy choices. If Syriza wins but not with an outright majority, it will need to form a coalition, possibly with Pasok, and that may also soften its demands. "

Nick Malkoutzis gives us a very good analysis on Macropolis where it went wrong for Antonis Samaras. When Samaras came to power in June 2012, he made a political U-turn and instead of seeking an alternative agreement with the troika he had campaigned for, his government's strategy for the next two years would try to meet and even exceed the fiscal targets in order to secure debt relief. They achieved a primary surplus at the end of 2013, but the eurozone was reluctant to move on its pledge to consider "certain debt reduction measures." Athens was told to wait until the figures were rubber-stamped by Eurostat, but then the discussion was postponed for after the European elections. Both coalition parties called on voters to back them, but they were not willing to wait any more and give Syriza a lead in the EP elections. This is the moment when the situation started to unravel, writes Malkoutzis. Samaras strategy of fiscal discipline in return of debt relief had proven to be ineffective. After the defeat in the elections, Pasok started to become more reticent agreeing to measures demanded by the troika while Samaras shocked the troika with replacing Yannis Stournaras and drove away a substantial part of the electorate by using loud party members at the frontline of the battle with Syriza. Samaras then decided that without debt relief, the EP elections and voters' support he needed to change the narrative especially as the presidential elections were looming at the horizon. He came up with the promise of an early exit from the bailout, not approved by the markets. The government put all their capital in securing a deal, but the troika's demands were too onerous to adopt ahead of the presidential vote and Syriza's pressure to hold snap elections. This is when Samaras chose to bring forward the elections.

Our other stories

We also have stories on the US and the EU diverging over Russia; on why the Fed is right to ignore oil; on Confindustria’s nervous optimism about the Italian economy; on Irish mortgages; on the rise of euro debt issuance by US companies; on the design flaws of the macroeconomic imbalances procedure; on Borrell’s comparision of the EU and the US crisis response; and on the costs of Podemos’ social policies.

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