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Greek report
by Euro Reporter
2012-05-06 10:46:48
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Greece starts voting as anxious eurozone looks on

Greece started voting on Sunday in an early general election that threatens to turn its decades-old political system on its head and bring the eurozone crisis back with a vengeance. After two years of austerity cuts, polls indicate that voters are set to punish Greece's two main parties for having accepted yet more belt-tightening in return for two bailouts worth 240 billion Euros ($314.0 billion). That prospect worries international lenders including the European Union and the International Monetary Fund, who fear that the resulting political instability could plunge the eurozone back into the mire. Both the Pasok socialist party and the New Democracy conservatives, the dominant political forces for the past four decades, look likely to lose votes to around 30 smaller parties, some fiercely hostile to further cuts. "We need to break from this corrupt political system of lackeys of foreign imperialism," Petros Alachmar, 31, an activist from the far-left Syriza party, told AFP. "We have had enough of austerity measures."

But with Athens having committed to finding in June another 11.5 billion Euros in savings through 2014, any ambition to renegotiate terms "suggests a degree of liberty they do not have", Swiss bank UBS said in a research note. Greece has already written off a third of its debts and is in its fifth year running of recession. One in five workers is unemployed, its banks are in a precarious position and pensions and salaries have been slashed by up to 40 percent. Voters are also fed up with decades of corruption and cronyism. And immigration has become an issue, raising the prospect that the neo-Nazi Golden Dawn, with a swastika-like emblem and an admiration for Hitler, may enter parliament. Pasok and New Democracy want the "troika" of the European Union, International Monetary Fund and European Central Bank to cut Greece more slack in their bailout deals.

But for many smaller parties this does not go far enough. New Democracy is expected to win the most votes, but not enough for leader Antonis Samaras to govern without partners. One might be Pasok, its current partner in a stop-gap coalition. Another possibility might be fresh elections. But for the markets and international lenders, the main fear is the implications for the battered eurozone. Holger Schmieding, economist at Germany's Berenberg Bank, said there was a 40-percent risk of Greece leaving the eurozone this year, with a "high" chance that no stable government willing to implement more reforms could be formed. Like Greece, Portugal and Ireland have received international bail-outs, and the economies of Italy and Spain are also struggling. For a while last year, there were even fears for the future of the eurozone, and while these have subsided in recent months, they have not completely disappeared. Germany, in particular, Europe's paymaster-in-chief and the leading proponent of austerity -- amid growing calls for more focus on growth -- will be watching events in Athens closely. In comments widely quoted by Greek newspapers on the eve of Sunday's vote, German Finance Minister Wolfgang Schaeuble said that if Greece's new government deviated from its commitments, the country would have to "bear the consequences."

"Membership of the European Union is voluntary," he said. His boss, Chancellor Angela Merkel, has managed to keep critics over the bailouts at bay so far but fresh eurozone upheaval could very quickly start to erode her popularity.


People of France, Greece have their say on austerity

Across the continent, officials have forced through brutal budget cuts despite mass protests from Paris to Prague. In Greece and Italy, technocratic prime ministers have been installed without a single citizen going to the polls. Of the 25 European nations that have agreed to a new treaty limiting public spending, only Ireland is bothering to let voters rule on it. But on Sunday, the people of France and Greece will have their say, in elections that have the potential to recast the debate on how to solve an economic unravelling that shows little sign of abating.

"Democracy is on its way into the euro crisis," said Hugo Brady of the Brussels office of the London-based Centre for European Reform. "While we don't know what that means, it does mean the end of a solely technocratic response to it." Sunday's elections are likely to see new leaders brought to power on pledges to revisit their countries' strict adherence to the austerity and fiscal discipline prescribed by Germany as the cure for Europe's ills. That the challenges come from these two countries is significant: France has been Germany's most important ally, while Greece sits at the epicentre of Europe's debt problems. But changes to the current game plan could also unsettle investors allergic to the slightest whiff of uncertainty.

When they open Monday, the markets could greet a possible shift in strategy as welcome recognition that new ideas are needed to pull Europe out of its economic and financial tailspin. Or they could view it as a worrisome relaxation of fiscal stringency and push up borrowing costs for nations such as Spain and Italy, causing another escalation of the crisis. But popularly elected governments should not allow markets to call the shots, said Juan Somavia, the director-general of the International Labour Organization. "In a democracy, it is more important to retain the long-term trust of people — especially the most vulnerable groups — than to gain the short-term confidence of financial markets," Somavia wrote in a recent opinion piece.


Leftist taps into anti-politician anger

In barely two years, Fotis Kouvelis has gone from obscure leftist rebel to the man who could hold the key to Greece's next government, after winning over many voters with his low-key, avuncular style. With a pro-euro and anti-austerity message, the 63-year-old's Democratic Left party has tapped into voter anger over the terms of an international bailout to emerge as one of four parties battling for third place when Greeks vote in a general election on Sunday.

A soft-spoken lawyer, Kouvelis gets around town in a small Ford and refuses fees for sitting on parliamentary committees, boosting his image as an upright, respectable figure among a political class widely viewed as corrupt and flashy. Avoiding the fiery rhetoric and bombastic speeches popular with Greek politicians, Kouvelis speaks in a measured tone and is seen as a figure that can restore the country's dignity.

"Political intensity and the power of a stance or a proposal cannot be found in yelling, but in the content of what you have to say," Kouvelis told Reuters. Pledging to ditch austerity policies without jeopardizing Greece's membership of the euro zone, Kouvelis has successfully lured away former PASOK voters disillusioned with the Socialist party's support for unpopular wage, spending and pension cuts. A veteran politician, Kouvelis says he was drawn to leftist ideals from the time he was a teenager.


Anguish, anger and apathy as Greece votes

"The most important index is happiness, not money," businessman Pedros Koroneos says with a smile as he watches two young women alight from a taxi on a gloriously sunny May morning in Athens. Strolling around the Greek capital's chic Kolonaki district, full of people like Pedros in his mirrored sunglasses and smart shirt sipping chilled frappe coffees and buying shoes, you could be forgiven for believing what he says. But the 39-year-old's happy-go-lucky demeanour and Kolonaki's expensive boutiques belie the reality of a country staring into the abyss as it goes to the polls on Sunday. In fact Greece is broke. To avoid bankruptcy it has been forced to secure two international bailouts worth a total of 240 billion Euros ($314.0 billion), it is in its fifth year of recession and one in five workers is unemployed.

The price for Greek people has been enormous, and if the EU, IMF and two main parties that have alternated in power since the end of the military junta in 1974 have their way, they will continue paying for many years to come. Even in Kolonaki, they have felt the pinch. "Wages are half what they used to be, so people are spending half of what they used to, so right now turnover is down 50 percent," Panos Ioannidis, 41, the owner of an upmarket 112-year-old flower shop, told AFP. "If in June wages go down another 30 percent, we are expecting the worst."

Even Koroneos, whose business interests include a small firm making pipes, has not been immune. "My factory employed 35 people. I paid 1,000 Euros per person, now I pay 600... Now I have 10 people," he says. He is philosophical but others are very angry at the political elite they say has brought the country to its knees after decades of economic mismanagement, corruption and cronyism. On Sunday, opinion polls suggested, many voters will shun the two main parties, the left-wing Pasok and New Democracy, and support instead a potpourri of around 30 other parties spanning every conceivable political ideology. The extremes include unreconstructed communists who never broke with Moscow, the neo-Nazi Golden Dawn that wants to mine the Turkish border again to keep immigrants out, and the misleadingly named Greek Ecologists, who are pro-nudism. Many of these smaller parties want to tear up the country's agreements with the troika of the International Monetary Fund, the European Union and the European Central Bank that bailed Greece out.

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