With his back to the wall, Prime Minister Simitis’s hopes are resting on one last card: the economy
Greece’s political life appears to be settling down to some extent after last Tuesday’s Parliament debate, when the government eventually abandoned its unsuccessful attempt to counterattack with allegations of conspiracies, thereby putting all those who had rushed to support the tactic in a somewhat difficult position. Prime Minister Costas Simitis himself avoided any extended reference to these scenarios and tried to divert attention to the economy, which he continues to consider one of his major advantages, at least in comparison with other areas, even though this view is considerably at odds with that of public opinion. He exploited a similar desire on the part of New Democracy leader Costas Karamanlis, who for quite different reasons preferred to engage in measured political debate. Thus a kind of temporary truce was achieved, giving Simitis the time he needs to bring to a close Greece’s six-month presidency of the European Union and then to announce whatever changes he plans to make within the party and the government. Although he still has to deal with the negative results (for his party) of the latest opinion polls, Simitis has gained time politically to make the changes he has already forecast for his government, although he does not have much margin for major changes. The recent crisis has made it clear that the prime minister will once again focus his attention on the economy. This became evident in the recent merger of Hellenic Petroleum (ELPE) with Petrola, and in his speech to Parliament. After all, the government, despite its insistence on presenting the situation in a favorable light, knows that this is where the electorate hurts the most. So efforts will be focused on improving expectations. Both Simitis and Economy and Finance Minister Nikos Christodoulakis expect that in the second half of 2003 and especially by early 2004, the recession in the US and Europe will have eased. They hope that the Greek economy will be able to function in a more favorable environment, boosted by the recent generous half-point reduction in European interest rates. This will have an immediate effect on at least the larger companies that borrow with floating interest rates linked to the European Central Bank’s basic rate. Based on this expectation, the government is now trying to jump-start the economy so that any momentum it can acquire will coincide with an upswing in the European economy, enabling maximum leeway in the pre-election handouts that will begin early next year. A stronger performance in the economy will provide wider opportunities and allow for attempts at reorienting the media and other sectors that have an powerful effect on public opinion. Initially the government is attempting to influence expectations in the broader business sector. Following the ELPE-Petrola merger and the reduction in interest rates, Christodoulakis has been dusting off the privatization program and will be attempting to achieve 60 percent of it by year’s end. He estimates the State will earn about 1.2 billion euros and consequently lift the pressure on public finances in the first half of the year. He has announced the second flotation of a second tranche of shares in the state lottery company (OPAP) for July, hoping to bring in about 750 million euros for 24.1 percent of the company’s stock. The minister also has reason to believe that the projected sale of 35 percent of the Public Gas Corporation will also be successful. Three consortiums, Spain’s Natur Gas, Germany’s Ruhr Gas and Russia’s Gazprom, in which the Kopelouzos group has a stake, have already submitted their bids. According to sources, a joint venture is likely between the German and Russian groups. If this does take place, it will make things difficult for the government, which hopes to earn over 300 million euros and an ambitious investment program on the part of the buyer. An initial share flotation of the Postal Savings Bank is also in the works, although Christodoulakis is actually hoping for a full privatization, knowing that it would further mobilize the banking sector. He has first-hand knowledge that all the major banks would like to own the Postal Savings Bank, and naturally realizes the effect such a move would have on the other banks’ strategies. A move of this kind would encourage further joint ventures and a new cycle of mergers with a knock-on effect, particularly for the stock market. It is common knowledge that the government longs for a revival of the stock exchange. Christodoulakis would be happy if, in achieving the above, he managed to usher in even a moderate revival of the stock market that has been slumbering since 1999. As to just how profitable such a venture could be is another question. The flotation of OPAP shares, and the absorption of so many resources by the State, undermines the stock exchange as an institution and restricts possibilities of recovery as it removes any dynamism. After all, the burdens incurred by the economy and the Athens Stock Exchange do not allow much hope for improvement. What does occur is not likely to have any momentum or duration to speak of. Nevertheless, the ASE is getting restless and market professionals appear to be readying for battle, awaiting their chance to grab on to any piece of information or any deal, no matter how far in the offing. The stock market rise of the past few days has shown just what kind of desire there is for a game that is late in coming. Apart from any desire on the part of the government to heal the gaping wound in the ASE, it is certain that the prime minister, with his back to the wall, has shown that he has reserves of strength. It is clear that he and his party will see this long campaign period, which according to all indications is likely to be one of the toughest in recent history, through to the end. It appears that the economy will be the arena in which Simitis will stage his defense against Karamanlis
