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Greece cannot afford election concerns

 The inertia and inaction which are evident in the public sector should not become the economic norm

By Dimitris Kontogiannis

A period of political uncertainty is bound to have a negative impact on economic activity but cannot be ruled out if the outcome of the elections for the European Parliament yesterday is seen by markets to create the conditions for snap general elections in early July or in the fall. <+sa_keim>The signs of the “traditional” slowdown before important elections are already evident in the public sector and may spread elsewhere as important decisions are put off. Snap elections or not, the last thing Greece needs now is a protracted period of inaction on economic matters.

When we were writing this article we did not know yesterday’s European Parliament and local elections outcome. Various recent opinion polls showed the leftist SYRIZA party was leading conservative New Democracy by a margin of 1 to 4.3 percentage points with a relatively large chunk of undecided voters heading into Sunday. According to analysts with access to polling data from different companies, little has changed since last week. This means the result of the first round of local elections, largely favoring the two ruling coalition parties except for the Attica region, had not had a noticeable impact on people’s vote preferences for the European Union ballot.

The analysis continued to give SYRIZA a clear lead over the conservatives while the far-rightist Golden Dawn party was firmly in third place, doing better than projected in the press. In addition, it indicated the conservatives had failed to pass the message to the general public that the country faced the prospect of snap elections if the outcome was not good for them. In general, analysts and high-profile politicians from New Democracy and the center-left PASOK party think a sizable SYRIZA win by more than four points combined with a poor showing by the Olive Tree (Elia) alliance, meaning less than 6 percent of the vote, could force early elections.

The same PASOK officials claimed the coalition government would not be able to go on if Elia got less than 6 percent regardless of how the conservatives do, but many others question whether this will be the case if New Democracy holds on. If indeed Greece goes into early general elections, these could be held as soon as July 6, some say. However, others disagree, citing the tourism period, and suggest they will take place in September or October. In the latter case, the current president of the Republic may resign earlier than the end of his term next spring so the election of his successor by the Parliament takes place close to the national ballot, they say.

The political landscape looks like a potential minefield at this point and developments there could provide either a booster or a setback to the country’s efforts to exit the six-year recession in 2014 and reduce its dependence on official loans. High-ranking officials in the public sector admit in off-the-record conversations the signs of a slowdown have been evident everywhere since early April. This is in line with the Greek tradition of putting off important decisions and projects till after important elections.

The situation is complicated by the power sharing agreed between New Democracy, PASOK and the moderate Democratic Left (DIMAR) party in the summer of 2012 after the three-party coalition government was formed. It is noted DIMAR quit the government last summer but most of its appointees in key public sector posts remain in place, the officials say.

In many cases, the appointees ask for approval from their party bosses before voting on certain issues, including minor ones sometimes, slowing down the decision making. Since early April, they have been less willing to take decisions and this has led to delays, affecting investment projects and public procurements. All public sector deals budgeted above 15 million euros should have the approval of a committee made up by representatives of all parties in Parliament. But Golden Dawn and the Communist Party (KKE) do not take part in the committees and are therefore replaced by judges, according to the officials. These delays could result in Greece’s failure to absorb EU funds.

Bankers and others in the private sector have also noticed that some reforms have slowed down. “The most worrisome aspect of the campaign for the local elections and the European Parliament is that many decisions on economic matters have been put on hold. If this goes on for a while, it will have a negative impact on the economy,” a senior official at a private bank said. He, like others, thinks snap elections will do the economy more harm than good. The government and the troika forecast real GDP growth of 0.6 percent this year, supported by a 1.1 percent year-on-year contraction in the first quarter. But all warn the economy remains fragile and a protracted period of political uncertainty could tip the balance.

The outcome of the elections for the European Parliament, much more than the local elections, will determine whether Greece will go into snap elections or not. Given the fragile state of the economy, political instability is the least desirable option. The inertia and inaction evident in the public sector should not become the economic norm regardless of political developments, although that is admittedly easier said than done.

ekathimerini.com , Sunday May 25, 2014 (23:39)  
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