GREECE (7)

In my last post on Greece, I said that the crucial question for rich countries is whether taxpayers are willing to accept the large, and ongoing, transfer of financial risk from the private to the public sector. In the case of Greece, the answer to that question is a resounding no. For if there is one clear message from Sunday's general election, it is that Greeks are fed up with austerity.

When the most recent rescue package was negotiated, the powers in the E.U. and IMF got the two major parties, the socialist Pasok and the conservative New Democracy, to commit to implement it, if and when they got into power. Unfortunately, they together got only 149 seats in the 300 seat Parliament, despite a quirk in the electoral law that gives an extra 50 seats to the biggest party (in this case New Democracy). Both votes and seats migrated away from the traditional parties to the extremes, unreconstructed left-wingers and rather nasty, anti-immigrant right-wingers. There will now follow a period of horse-trading within Greece in order to try and form some sort of coalition; if that succeeds, there will then be a period of brinkmanship as the resulting Government tries to renegotiate the terms of its deal with its European partners.

Personally, I don't believe that either scenario will come to fruition. The sad fact is that Greece is caught between a rock and a hard place at the moment. Much more likely in my view is new elections, in which, having let off steam, the Greeks sullenly accept reality and give Pasok/ND a narrow Parliamentary majority which they can use to inflict more pain.

Walter Blotscher