There is
one country where the European parliamentary elections really do matter—Greece
By SIMON
NIXON
The Wall
Street Journal
May 18,
2014 5:45 p.m. ET
There seems
to be a broad consensus—among voters and in the markets—that this week's
European parliamentary elections don't matter very much.
Although
the Parliament has gained new powers over the years, few voters identify with
it. Polls suggest many will see the election as an opportunity to cast protest
votes for populist parties. Most voters suspect the outcome will make little
difference to the future direction of Europe ,
which will in any case continue to be set by national leaders and parliaments.
But there
is one country where the European elections really do matter
In Greece
As things
stand, that seems unlikely: The latest polls suggest New Democracy will get 21%
of the vote and Pasok 5.5%, compared with 21.5% for Syriza.
But even
this may not be enough to guarantee the coalition's survival.
Pasok and
its leader, Evangelos Venizelos, have become lightning rods for public anger
for the crisis; its current share of the vote compares with 12% in the June
2012 election and 39% in 2009.In response, Mr. Venizelos last week said he
would quit if the public didn't give his party sufficient backing, without
specifying how low Pasok's vote share would have to fall to trigger his threat.
From an
economic perspective, there can be little doubt that fresh political turmoil
would pose a serious risk to what is proving to be a remarkable turnaround in Greece
Following a
smaller-than-expected contraction in the first quarter of 2014, the economy
looks on track to return to growth in the third quarter, with growth of at
least 0.6% expected for the full year.
Unemployment
has fallen for six months in a row. The budget—excluding interest payments—and
current account are both in surplus, paving the way for the euro zone to honor
a commitment to ease the burden of Greece's official-sector loans and put its
national debt on a long-term sustainable footing.
In the past
few weeks, international investors have poured an astonishing €15 billion
($20.54 billion) into government bonds, bank shares and bank bonds—a vote of
confidence that Greeks hope is a sign the worst is finally over.
At the same
time, it is becoming apparent that the crisis has brought about many
long-overdue reforms, eliminating privileges for special interest groups,
improving transparency and removing barriers to competition in many sectors,
including retail, transport, energy and professional services.
As a
result, prices are finally falling for many items, easing the pressure on the
cost of living for a population hit by savage cuts in income. The labor market
is more flexible and entrepreneurs say it is easier to start a business. The
full benefits of many reforms will only start to become apparent as the economy
picks up.
The stalled
privatization program appears back on track, with ports, airports, railways and
marinas currently for sale. There has been a surge in inquiries from foreign
investors in recent weeks, according to the privatization agency.
Six foreign
groups have expressed interest in the sale of a controlling stake in Piraeus
Port Authority. PPA.AT +3.83% Fourteen
transactions are expected to close this year and €10 billion in receipts are
expected by 2016. But equally important is the investment and skills that new
owners are expected to bring.
Importantly,
the newly recapitalized banking sector appears determined to tackle its
mountain of bad debts, now expected to peak toward the end of this year at over
35% of all loans. All four major banks have set up internal "bad
banks" to speed up the liquidation of insolvent companies and
restructuring of viable companies, essential to allow healthy companies to
invest and grow again.
In a
landmark deal, Piraeus Bank TPEIR.AT -4.14%
last week executed an aggressive debt-for-equity swap that gave it a
controlling stake in Marfin Industrial Group, previously controlled by one of Greece
What's
more, Mr. Samaras appears determined to push ahead with his reform program,
despite concerns among some euro-zone officials that easier financial
conditions will lead to complacency.
A new
bankruptcy code is expected in October that will give the banks further powers
to restructure bad debts. The government says it is committed to implementing
the remaining recommendations out of 329 proposed last year by the Organization
for Economic Cooperation and Development. Substantial reform of the public
administration is planned to improve its efficiency. Mr. Samaras has also
proposed sweeping constitutional reforms in response to public anger over the
current system.
But can Mr.
Samaras persuade voters to give him more time?
After six
years of recession and with unemployment still at 26%, it is hard to
underestimate the rage that Greeks feel toward the two coalition parties that
dominated politics for decades.
Yet at the
same time, polls indicate that voters too are wary of unleashing fresh
instability: 70% of voters say they don't want new elections, 69% want to stay
members of the euro zone and only 30% believe that the radical leftist Syriza
party led by Alexis Tsipras is ready to lead the country.
Meanwhile a
new party, To Potami, is currently running third in the polls at 8.5% despite
offering no policies, only new faces and a promise to cooperate with other parties.
What's
clear is that Mr. Samaras is determined to avoid new elections. Even if Mr.
Venizelos quits, Mr. Samaras will seek a vote of confidence in Parliament that
he would expect to win, appealing to smaller parties and even some of Mr.
Venizelos's Pasok colleagues for whom early elections would be political
suicide, according to a person familiar with his thinking.
Mr. Samaras
may fancy his odds of winning such a vote. But the next few weeks could be
bumpy.
Write to
Simon Nixon at simon.nixon@wsj.com
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