The easy bit is over for newly elected Prime Minister Kyriakos Mitsotakis – at least as regards beating SYRIZA and forming a majority New Democracy government. Up until a couple of months ago, these were not things that could be taken for granted, regardless of what some people now claim.
What is odd is that most of the whingeing came from ND supporters who had made up their minds not too long ago that SYRIZA would never be gotten rid of and that its leader Alexis Tsipras would work some sort of magic to stop ND forming a majority government; and so they were content with the prospect of ND forming a coalition.
Now, with victory in the bag, the hard part lies ahead. To begin with, there’s the new electoral law hanging like the sword of Damocles over the political system, threatening its stability. New Democracy and Movement for Change (KINAL) have already pledged to fix SYRIZA’s dangerous legacy on this front, but with the two parties having 180 seats in the new Parliament – instead of the super-majority of 200 that would be needed to change the law – the next general election will be under a system of simple proportional representation and the first party will not have 50 bonus seats. No one can predict what the political situation will be when that happens, but if things go pear-shaped, such an electoral system could be destabilizing for the political system.
In the area of the economy, the challenges are much more apparent and much tougher. There’s a mountain of nonperforming loans that is blocking up the economic circulatory system – in today’s world, the banking system is the economy’s heart, pumping lifeblood into economic activity. If the heart doesn’t work, as is the case right now, growth will never be achieved.
Public Power Corporation is another major challenge. On the verge of bankruptcy, every possible solution for the state-owned power company is a painful one. Four years of ideological fixations and mismanagement will – unfortunately – show up on the bills of consumers.
The upside is that foreign markets are upbeat about the Greek economy, which will make borrowing easier and cheaper for troubled state-owned firms (DEKOs), with PPC being by no means the only one. This borrowing will in turn buy the new government some time to reform the over-indebted DEKOs, but in their current state, they stand in the way of an economic bloom.
The smiles and cheap money, however, will only last as long as the Mitsotakis administration delivers on its promises of deep structural reforms.
Unfortunately, investor confidence in Greece – and in its politicians first and foremost – has become sapped by 10 years of broken promises and aborted reforms.
The momentum right now is positive, but it is geared by expectations. It will be maintained and strengthened only if promises are implemented and it will die down if some minister or another starts ho-humming and making excuses that hark to a return to inertia. There is a lot at stake and nothing can be taken for granted.