Why Greece Is In a Tailspin
Whatever happens in Greece on June 17, here you can understand why and what it means.
A previous article explained why the euro crisis goes on and on. Put briefly, the modern Greek state has faced bankruptcy several times in the past because of the style of Greek political life. The leaders of Europe are ignorant of that Greek history, so their approach to the latest Greek bankruptcy permitted the crisis to spiral into a threat to the whole eurozone.
There was also the warning that the upcoming Greek elections would merely add a new twist to the spiral. The election results confirmed that prognosis, although at first the European leaders did not realize it. Now those leaders are worried, but they still do not understand.
What has particularly exacerbated the crisis is the Greek electoral law. The law is intended to force the Greeks to form a stable central government, despite the chronic inability of Greek politicians to agree upon anything. This time round, the law had the contrary effect of making the formation of a government impossible.
The electoral law has three main features. First, any party that receives at least 3% of the total votes cast will be represented in the parliament. Second, the party that receives the largest number of votes gets a bonus. When introduced in 2004, the bonus consisted of forty seats out of the three hundred in the parliament; now it is fifty seats. Third, the remaining seats are distributed among the parties in proportion to the percentage of votes received. (There are further details to the law, but their impact is marginal.)
The bonus replaced an electoral law of 1990 that had the same aim of promoting stable government. Both laws were based on the observation that in every election from 1977 on either the center-right New Democracy (ND) or the Panhellenic Socialist Party (PASOK) had received between 40-50% of the votes cast. The laws aimed to ensure that this would suffice to give the winner an absolute majority in the parliament. Currently, the winner is assured of that majority with 40.4% of the votes cast but may get it with several percent less, depending on which parties pass or fail the 3% threshold.
Up to the latest election, consequently, the Greek public concentrated its votes on those two major parties. A few diehards insisted on voting for the Greek Communist Party (KKE), while the loony left voted for an alliance of leftist factions, currently operating under the acronym SYRIZA. More recently, some Greek Orthodox nationalists got into parliament under the acronym LAOS (which in Greek also means "the people" in the religious as well as the political sense).
Thus the election of 2009 produced the following result in seats and percentages: PASOK 160 (43.92%), ND 91 (33.47%), KKE 21 (7.54%), LAOS 15 (5.63%) and SYRIZA 13 (4.60%). A mere 4.7% voted for parties that failed to enter the parliament; the figure was 3.0% and 4.9% in the elections of 2007 and 2004. The electoral bonus had achieved its aim.
This time round, however, 19.0% of the votes cast went to parties that failed to enter the parliament. Opinion polls in advance of the election suggested that up to ten parties might reach the 3% minimum. In the event, no party got as much as 20%, seven parties got in, and two others failed by a tenth of a percent. Also 35% of the electorate failed to vote for any party, up from 29%, 26% and 24% in the three previous elections.
To explain how the electoral bonus lost its deterrent effect, we must recall some details of the unfolding crisis. The election of 2009 was called because the then ND prime minister, Kostas Karamanlis, felt that he could not pursue needed austerity measures with a tiny majority in parliament. PASOK's leader, George Papandreou, successfully campaigned on the demagogic slogan lefta uparxoun ("There's money!"). Having won the election, he discovered that there were even less lefta available than Karamanlis had claimed because Greek financial statistics had been fiddled for years.
Faced with Greece's inability to redeem government bonds, Papandreou admitted, to his credit, that drastic austerity was unavoidable. In 2010, he negotiated with European leaders a "memorandum" that specified the measures that Greece would take in return for loans from eurozone members, especially Germany, and the International Monetary Fund (IMF). The measures included a program of cutting the numbers of government employees as well as reductions in their salaries and pensions. Taxes would also be raised, tax avoiders would be rigorously pursued, government companies would be privatized. Greek compliance with the austerity measures would be monitored by a "troika" consisting of the European Commission, the European Central Bank (ECB) and the IMF.
In the Greek parliament, the PASOK majority voted for the memorandum, while ND allowed itself the luxury of voting against what it had advocated while in government. One ND politician with an illustrious record, Dora Bakoyannis, voted in favor. She was immediately expelled from ND by its new leader, Antonis Samaras.
By late 2011, it became evident that the euro crisis could not be resolved without writing off much of Greece's public debt. The eurozone and the IMF agreed to this on condition of yet more austerity. Revolts in PASOK meant that Papandreou could no longer command a majority in parliament. Samaras agreed to the formation of a national emergency government that would ratify the agreement, but on two conditions: Papandreou should be replaced by a technocrat as prime minister and an election should be held as soon as possible, which Samaras expected to win.
Led by Lucas Papademos, vice-president of the ECB before his appointment as prime minister, the caretaker government achieved many of its designated aims, as a recent report of the European Commission testifies. Evangelos Venizelos, who had replaced Papandreou at the head of PASOK, served on as deputy prime minister. In the meantime, however, the parliament was descending into chaos.
Bakoyannis had formed a new faction, calling itself the "Democratic Alliance." Other ND parliamentarians voted against the appointment of Papademos and left ND to form a rightist anti-memorandum party, the Independent Greeks. Members of SYRIZA and PASOK defected to form a new group, the Democratic Left (DEMAR). Among parties that had failed to enter the parliament in 2009, the Ecological Greens were attracting leftists and an upstart nationalist organization, the Golden Dawn, was stealing voters from LAOS. This is a party whose electoral symbol is reminiscent of the swastika and which uses Nazi-style salutes. Its excuse is that both symbol and salute have ancient Greek antecedents.
On May 6, Samaras got his victory, but a Pyrrhic one. ND lost 48% of its voters of 2009; PASOK lost 72% of its own. As my previous article had expected, there was no longer a clear distinction between "major" and "minor" parties. A slim majority of the new parliament consisted of leftist or rightist parties that had campaigned for repudiation of the 2010 memorandum. Without the bonus for ND, it would have been a 60% majority. This, just as Greece needs the upcoming tranche of loans within weeks.
Specifically, the result was: ND 108 (18.85%), SYRIZA 52 (16.78%), PASOK 41 (13.18%), Independent Greeks 33 (10.60%), KKE 26 (8.48%), Golden Dawn 21 (6.97%) and DEMAR 19 (6.10%). Close to entering parliament were: Ecological Greens (2.93%), LAOS (2.90%) and the Democratic Alliance of Bakoyannis (2.56%). Over ten percent went to other lesser parties.
Three consequences of the results deserve note. If Samaras had kept Bakoyannis within the party, ND might have obtained enough seats to form a narrow majority with PASOK. Golden Dawn bounded into the parliament from nowhere (0.29% in 2009). SYRIZA leapt from last place in 2009 to second and almost to first place in the new parliament.
The Greek constitution, with the aim of forcing Greeks to agree among themselves, defines the procedure following an election in strict terms. The President of the Republic summons the leader of the largest party and gives him or her three days to find a majority in the new parliament. If that leader fails, the President summons the leader of the second largest and then that of the third largest party with the same commission. Should they also fail, the President calls all the party leaders to see if they can somehow create a government or, if not, whether they can agree upon a temporary prime minister who will organize a new election.
If the parties cannot even muster a majority in parliament to appoint a temporary prime minister, the President must dissolve the parliament forthwith and appoint a leading judge as the temporary prime minister. All that happened this time, leading to a new election on June 17; let's see how.
Responding to the election of May 6, the leaders of Europe expressed their firm and urgent expectation that a new Greek government would quickly be formed and energetically continue Greece's compliance with its international obligations. They should have realized immediately that this was an absurd hope.
For one thing, several parties were officially opposed to cooperating with others. Thus the Independent Hellenes, though rightist, were vehemently against joining an ND government. KKE declared that to collaborate with SYRIZA, though leftist, was like collaborating with ND. And no other party could cooperate with Golden Dawn. Moreover, SYRIZA was for new elections as soon as possible, since new opinion polls showed that it would now win first place and the bonus of fifty seats.
The bonus, that is, has become a destabilizing instead of a stabilizing factor. The assumption on which the bonus was created – that at least one party would receive close to a majority of votes – has vanished and is unlikely to return any time soon.
So Samaras of ND told the President within hours, not days, that he could not find a majority. Alexis Tsipras, the leader of SYRIZA, spent his three days in antics that had nothing to do with forming a government. Third, Venizelos tried diligently to persuade DEMAR to join an "ecumenical" government with PASOK and ND. But DEMAR laid down two conditions, both impossible: the ecumenical government must include SYRIZA and its first priority must be to renegotiate the 2010 memorandum. The European leaders had already repeated emphatically that Greece's obligations could not be evaded if it wanted the next tranche of loans, due shortly. And SYRIZA refused, of course.
It is worth describing the antics of Tsipras in detail, since they show how detached SYRIZA is from reality. This party is a conglomerate of – to date – twelve groups of Trots and what-nots; it would never agree on what to do, but only on what to oppose. It imagines that Greece can keep the euro while disregarding the 2010 memorandum. Opinion polls show that Greeks indeed overwhelmingly share both those wishes. Most Greeks, that is, are convinced that they can have their cake and eat it.
Tsipras only consulted other parliamentary parties briefly at the end of his three days. He began, instead, by talking to extra-parliamentary groups that he hoped would vote for SYRIZA in a new election. Then he turned to the public sector trade unions, which are his natural allies since they have conducted endless strikes against the implementation of the 2010 memorandum. But their leaders told him that they wanted no part in the political process. That is, they refuse to commit themselves in any way even to parliamentarians who would fulfil all their wishes.
On the same May 6, the socialist François Hollande had replaced Nicolas Sarkozy as President of France. So Tsipras wrote to him, asking for an urgent meeting. But Hollande replied that he would meet only a head of government, not a head of party. In the meantime, however, Hollande has received his fellow socialist Venizelos in Paris, so his reply to Tsipras can be seen as a brush-off.
Next Tsipras wrote letters to various leaders of European countries and institutions, informing them that the Greek people had "annulled" the 2010 memorandum in the election. He gave the same message to Greeks themselves, claiming that Greece's international commitments merely bore the "personal signatures" of the leaders of PASOK and ND, but that the Greeks had now annulled those signatures by electing a parliamentary majority of opponents of the memorandum. Needless to say, this is an impudent and outrageous repudiation of a fundament of international law: that an incoming government must honor the international commitments of its predecessors.
Finally, he gave interviews in the same vein to the international press. In a conversation with the Wall Street Journal, for example, he was sure that Greece would continue to receive loans from the eurozone countries even if he, as prime minister, cancelled all the cuts in the Greek bureaucracy. Otherwise, he threatened, he would simply refuse to pay Greece's debts. In any event, he was sure that Greece could evade its commitments and still stay in the eurozone.
What Tsipras ignores here is that Spain and Italy are also enforcing major budget cuts like the Greek ones. Even the Dutch, with their much stronger economy, have had to cut back on government expenditure and raise taxes in the so-called "Spring Agreement" (Lenteakkord) of May 16 this year. If all of them followed Greece in abandoning those policies, the euro would collapse. So the European leaders, if Tsipras forces their hand, must rather kick Greece out of the euro, cost what it may. And it will cost Greece most, since nobody will then lend money to Greece or risk investing money there.
Nothing dismayed, Tsipras also told the Greeks that Angela Merkel, the strong woman of Germany, had more to fear from him than vice versa. If Greece left the euro, he said, German voters would punish her. How little he knows! The Bild Zeitung, Germany's lowbrow mass circulation newspaper, has already branded him as "the Greek who wants to keep our billions" and asked "Will he lead Greece to catastrophe?" Nothing would delight Germans more and boost Merkel's popularity than taking Greek hands off their money pots.
No doubt, Tsipras feels himself reinforced by the statement of Obama at the recent G8 meeting that all the political leaders wanted Greece to stay in the eurozone. But Greeks should have no illusions. Handing over power to the temporary prime minister, Panagiotis Pikrammenos, Lukas Papademos unambiguously defined the choices facing the Greek people in an Open Letter to the Greeks that was posted on the official Website of the Greek Prime Minister. He repeated the same message in his own interview with the Wall Street Journal. The latter article, too, was widely reported in the Greek press, together with a list of similar warnings from the IMF and European political leaders.
Nor could Tsipras form a government even if SYRIZA wins the election, receiving over a hundred seats including the bonus. His rise in the polls has come at the expense of other leftist parties. Though his ambition is to lead a coalition of the left, both PASOK and KKE refuse to serve under his leadership, leaving him only DEMAR. Such a parliament would contain a majority of opponents of the 2010 memorandum, whether on the left or on the right, but no possibility of forming a government.
This would be like Germany in the last years of the Weimar Republic, when Nazis and Communists together formed a majority of the Reichstag. The prospect for Greece is to be both out of the euro and ungovernable.
Greece's last hope for sanity is that ND is trying to rally other center-right groups to its support, so as to gain the edge on SYRIZA and retain the fifty-seat bonus. Some LAOS members who lost their seats in parliament on May 6 have now switched to ND. Dora Bakoyannis has been told that all is forgiven and she can have a secure place on the party list. Her party has agreed to a merger with ND, although her initial reply was that she was thinking of leaving politics altogether. She lost her first husband, by the way, to a political assassination.
Whatever happens in Greece on June 17, here you can understand why and what it means.
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