PASOK’s moment of truth

Reforming Greece’s fossilized pension and labor systems is the eye of the needle through which George Papandreou’s PASOK government must pass. It has to adopt changes no government dared – neither the nominally socialist PASOK nor conservative New Democracy, which have alternated in power over the past 36 years. Pressure groups kept increasing their benefits, without anyone seeming to care whether the economy could afford them. Suddenly, with the country on the brink of bankruptcy, PASOK has no option but to slash benefits in a bid to save the economy. It is doing so against its nature and against its will – and only because this is a condition set out by the International Monetary Fund and the European Union in exchange for the 110-billion-euro emergency loan. With 157 seats in the 300-seat Parliament, the government must now try to pass the reforms without losing its majority while also keeping control of the street. Neither task will be easy. Papandreou himself campaigned in the October elections as if he was in another country, declaring that Greece would have enough money to spread around after his party regained power (following a five-and-a-half-year break). Members of every party have always been firmly on the side of handouts rather than austerity. Already, when Parliament voted on the memorandum that sets out the conditions of the IMF-EU bailout, Papandreou had to expel three PASOK deputies who abstained. Now his aides fear that the very unpopular pension and labor market reforms could inspire more deputies to go against the party line. The government’s fear of tangling with opposition activists has been strikingly evident in past weeks, as Communist Party-led unions have chosen to stoke as much trouble as they can by carrying out a demolition job on tourism – the one sector in which Greece could hope to earn some money and keep unemployment under control. This week, even after a court ruled that their protest was illegal, two seamen’s unions blocked entry to ferry boats and stopped tourists and Greeks from getting to the islands. This protest, like those that have been aimed at cruise ships, gained international attention. Tourism, already down by about 10 percent, will fall even further. The government’s response to the port takeovers has been to stand back discreetly, avoiding any confrontation that would allow the Communists and smaller leftist groups to raise the stakes by declaring that human rights are under attack. This is a repeat of the brutally simple system with which the country has been looted over the past decades: Whenever an interest group expressed a demand or voiced its displeasure, the government would cave in, so that it would curry favor with the group while avoiding any unpleasantness. The previous New Democracy government, although ostensibly «conservative,» kept falling over itself to appease even the most absurd demands the moment they were formulated. Now the country is at a dead end and changes that could have been made gradually will be sudden and painful. It is worth remembering that when the PASOK government under Prime Minister Costas Simitis tried to reform the pension system in early 2001, it was his own party (and the unions under its control) that turned his reform-minded administration into a lame duck for the three years before the next elections. A decade earlier, the ND government of Constantine Mitsotakis stayed the course against daily protests and reformed the pension system so that it could come as far as it has. Citizens have received the message that things must change. There is far greater acceptance of painful reforms than ever before. But the government has not been assertive in persuading people that this will lead to a fairer distribution of benefits and that it is prepared to stand up to the protests. On the one hand, it does not seem to believe in the reforms; on the other, it has shown readiness to make changes that will make them more just – such as maintaining current levels of severance pay for people who already have jobs (instead of halving it) and reducing it only for those who will be hired now, as an incentive for new hires rather than more layoffs. These are the details that will decide whether people will accept the reforms or not.