After carefully reading the agreement reached at the recent meeting of the Eurogroup in Malta, I have drawn the conclusion that (either by coincidence or by design) the government that will win the next Greek elections will as of day one find itself in the middle of a minefield.
The next vote will most probably take place in late 2018 or early 2019, before the introduction of the fresh pension cuts. The new administration will inevitably have to shoulder the cost of further austerity. Furthermore, there are a number of points to consider:
The government will need to solve the problem of collective bargaining agreements. The Malta agreement foresees that the issue will be re-examined after the conclusion of the Greek bailout program, so the hot potato will be in the hands of a different government. Meanwhile, there is good reason to believe that leftist SYRIZA will respond by taking to the streets.
The year 2019 will be a difficult one in terms of the installments that the Greek state will have to pay. If Greece has not managed to return to the markets by that time, the obstacles will be huge with little room for maneuver.
In March 2020, the Greek Parliament will have to elect a new president. If history is any guide, SYRIZA will most likely try to block the re-election of the incumbent, Prokopis Pavlopoulos, in order to trigger a fresh election.
In that case, Greece will face the worst-case scenario. The new electoral law was carefully designed so that the next prime minister would not be able to use the traditional weapon of a double ballot. Fragmentation and political chaos will be right around the corner.
There are many obstacles ahead for the next government. Of course one can always hope that the completion of the bailout review will finally spur economic growth and the country will be able to return to the financial markets. However, it’s hard to imagine the current administration transforming into an effective and solid government that will make a conscious effort to lure foreign investors. Foot-dragging is a more realistic expectation. Investors are allergic to political uncertainty, which appears to be the only certainty in the next two to three years.
The next government will inherit a very weak economy with very little wiggle room. Even if SYRIZA only controls a very small part of the popular vote, it will still be able to influence developments. And of course all that will not be to the country’s benefit.