Greek PM Samaras confronts peril putting his Greek transformation to vote

Prime Minister Antonis Samaras has become the stabilizing figure during the Greek financial crisis. Now he’s facing a vote that may determine whether he becomes a transformational leader or another flawed transition in the nation’s perilous politics.

Since coming to power in 2012, Samaras has shed his divisive reputation, secured Greece’s position in the euro region and held together a shaky coalition. And he’s on track to achieve what many analysts believed was impossible just two years ago: the first balanced budget in more than four decades.

“When Samaras became prime minister, most people held their breath,” said Stathis Kalyvas, professor of politics at Yale University in New Haven, Connecticut. “Expectations were universally low. Clearly, he exceeded these expectations by stabilizing the economy and putting the country back on a path toward more sustainable growth.”

The danger for the Greek prime minister is that he will become the victim of his own success as voters wearied by five years of austerity turn to a firebrand opposition leader bent on undoing many of his cuts. The 63-year-old leader of the business friendly New Democracy party, which governs with the Socialist Pasok, needs to pull together a supermajority in parliament this month to elect a new head of state or risk being forced out.

Early Election

Samaras has to lure at least 25 opposition lawmakers by December 29 to push through his nominee for president and failed in his first bid to do so this week.

A defeat would spark snap general elections that polls show would probably be won by the anti-austerity Syriza party. Led by Alexis Tsipras, it aims to increase wages, expand the number of government jobs and persuade the European Central Bank and the euro area to write-off of some Greek debt.

“None of these actions has a chance of being accepted by Greece’s lenders,” said Nicholas Economides, an economics professor at New York University’s Stern Business School. “If Syriza insists on these policies, Greece will have to leave the euro with extremely dire consequences.”

On December 9, the first day of trading after Samaras called the presidential vote, Greek shares and bonds plunged. The Athens Stock Exchange Index tumbled 13 percent, the steepest drop since 1987, while 10-year bond yields soared to 8.18 percent.

Bailout Opponent

Even after those declines, Greek bonds have surged since Samaras came to power in June 2012. The securities returned 328 percent over the period, according to Bloomberg World Bond Indexes. German securities, the euro-area’s sovereign benchmark, earned 10 percent over the same period.

Samaras began the Greek crisis as an opponent of the 240 billion-euro ($295 billion) bailout program that has come to frame his political and policy successes.

As opposition leader in 2010, he attacked the Pasok Prime Minister George Papandreou’s decision to accept an international rescue and made political capital from the budget cuts the country was forced to enact. The debate was given added spice because the two men had been friends since high school and shared a dorm at Amherst College in the Massachusetts town of the same name during the 1970s.

Their opposition to the military regime in their home country brought them together at college and, even at the height of the political disputes, Papandreou said that their personal relationship remained separate. In a 2011 interview, Papandreou imagined sharing a glass of wine with his adversary 10 years down the road to reflect on how things turned out.

Merkel Snub

German Chancellor Angela Merkel wasn’t so generous. She snubbed Samaras for 18 months at meetings of the European umbrella party they both belong to, according to two Greek officials who spoke after Samaras took office. They asked not to be identified discussing private matters.

His stance changed after he took responsibility for running Greece. Following repeat elections over six weeks in 2012, he stitched together an unprecedented alliance between the two parties that had competed for dominance of Greek politics since the military junta collapsed in 1974.

From that point, Samaras has walked a high-wire by trying on the one hand to dispel euro-area and International Monetary Fund doubts about Greece’s commitment to fiscal discipline and, on the other, to ease Greeks’ anger about the worst recession in more than half a century.

That balancing act cost Samaras in mid-2013 when Democratic Left, the third party in the coalition, abandoned the government because of an austerity-driven decision to shut down the public broadcaster, suspending 2,600 jobs.

Fragile Coalition

Since then, he has struggled to impress creditors without losing further domestic support. The result: a race to keep aid flowing, negotiate a less-intrusive support program and foster a more tangible economic recovery before his authority is undermined.

The ruling coalition’s fragility has reinforced a hands-on management style by Samaras, who has dropped into negotiating sessions in Athens with Greece’s international inspectors to press the government’s case. Samaras also makes his presence felt through a six-foot-three-inch-tall (1.9-meter) frame and a propensity to curse.

“I have an early warning system: I see the calendar of things that ministers have to do on my computer,” he said in an interview in April. “If I see they haven’t done so, I call them and ask why they haven’t delivered, even if it’s after midnight. No hanky-panky, no ifs and buts.”

The rump New Democracy-Pasok alliance has pushed ahead with spending cuts so aggressively that Greece reached a target to post a budget surplus excluding interest payments in 2013, a year ahead of schedule. In 2009, the deficit was more than 15 percent of gross domestic product. Next year it will be practically zero.

‘First Shoots’

The country also returned to bond markets in early 2014 and emerged from a six-year recession this year.

Samaras’s progress has won the approval of Merkel. During a visit to Athens in April, a day after Greece sold bonds for the first time in four years, she applauded the country for its “step toward normalcy.” In Berlin five months later, she said “the first tender shoots of success are visible” for Greece.

German Finance Minister Wolfgang Schaeuble kept up the praise in Brussels on December 9, making it personal this time. Samaras has been the “decisive figure” most responsible for Greece’s recovery, Schaeuble said.

The challenge for Samaras is the recovery’s feebleness. Greek unemployment has stayed above 25 percent, the highest rate in the European Union.

Stalled Reforms

So while Greece’s budget numbers have won plaudits from Berlin to Brussels, Greeks’ economic hardship has fueled support for Syriza, a loose alliance that includes ex-Pasok supporters and members aligned at EU level with former communists in countries such as Germany.

Yale’s Kalyvas said that, if Samaras’s latest gamble fails and he is ousted in snap general elections, he may also be remembered for sidestepping fundamental economic changes that target vested interests and for lacking inspirational qualities.

“The government’s appetite for structural reforms, never big in the first place, quickly contracted,” Kalyvas said. “And he failed to articulate a powerful vision for the future.”

Samaras’s view of the future has been getting more short- term by the day. That’s because his plan for the second half of the government’s mandate ran into trouble.

Bailout Exit

After New Democracy lost the European Parliament elections in May, Samaras’s program of fixes to free up the Greek economy and boost growth stalled, and that in turn complicated his relationship with the euro area and the IMF.

Samaras had planned to negotiate an exit from Greece’s bailout by the end of this month — more than a year ahead of schedule. He aimed to replace that with a less intrusive precautionary credit line and then build support for electing a president in February.

Greece’s failure to win approval for this year’s final aid tranche of as much as 7 billion euros scuppered the plan. So Samaras changed tack. By calling the presidential vote now, after receiving an extension to qualify for the disbursement until the end of February, Samaras leaves a potential Syriza-led government to decide on whether to accept the demands of Greece’s international creditors.

Uncharted Territory

Because polls put Syriza short of winning an absolute majority, Tsipras would probably have to stitch together a coalition of his own to match the stability that Samaras forged with Pasok. This would represent more uncharted territory for Greece.

“It’s very unusual in the Greek political culture to have this kind of coalition,” said Janis Emmanouilidis, director of studies at the European Policy Centre in Brussels. “There has been a remarkable fiscal-consolidation effort in Greece over the past two years. This policy success stems from a degree of political stability that many thought wouldn’t be possible.”

[Bloomberg]