May 28 (Bloomberg) -- Greece’s Democratic Left party, which may determine the governing coalition following June 17 elections, said its backing for the biggest anti-bailout party depends on getting a guarantee to stay in the euro.
“We have two red lines: one is a policy which serves the country’s steady presence in Europe, the euro, the euro area, and the other is a gradual disengagement from the terms of the bailout,” party leader Fotis Kouvelis, 63, said in a May 25 interview in Athens. “All this needs to be set out because red lines may exist but the policies you choose is what matters.”
With opinion polls indicating no party winning a majority, Kouvelis said he’d team with Syriza leader Alexis Tsipras, who advocates unilaterally canceling the austerity measures demanded for a bailout, with an agenda of re-negotiating the terms of the rescue. The cuts required for 240 billion euros ($306 billion) of aid have driven the country into the worst recession since World War II.
Kouvelis refused to join a unity government that didn’t include Syriza, the second-place finisher after a May 6 election, requiring the need for a revote. Another inconclusive result may mean the country runs out of money as soon as early July. International inspectors won’t visit Greece for a review that allows funds to be paid until a government is formed.
Opinion polls since the May 6 vote have shown Syriza challenging the New Democracy party, which voted for the bailout, for first place. Both would still need to team up with other parties to form a majority and govern.
Syriza’s Tsipras, who has said he’ll try to keep Greece in the euro while pledging to cancel austerity measures, rebuffed approaches to form a coalition. The standoff reignited concern the country will leave the 17-nation euro area.
“Greece’s exit from the euro area would mean many and significant problems,” Kouvelis said. “I can’t rule it out being a possible choice of our partners. Such an eventuality, irrespective of the huge negative consequences on Greece, would also create problems for other countries in the euro area.”
Kouvelis says there is recognition now on a European level with talk of curbing youth unemployment and boosting growth that can help a new Greek government gradually revise some of the bailout terms. The “easy solutions” of pension and wage cuts taken in return for funds have driven 30 percent of the Greek population to live below the poverty line, with a “vanishing” middle class and “galloping” unemployment, he said. More than one in two young Greeks is out of work.
Instead, not enough has been done to stamp out tax evasion, curb the black economy, which is 30 percent of output, and cut unnecessary health, pharmaceutical and defense spending, he said. The party advocates a banking system with a state-ownership stake.
“Greece has need of reforms, both on the level of how the state works and on the level of how markets work,” said Kouvelis, a lawyer who broke from Synaspismos, one of the groups making up Syriza, in June 2010 for what he called a slide into “anti-Europeanism.” “There are reforms, necessary actions, which must and should occur regardless of the presence of the IMF or troika in Greece.”
Syriza’s unexpected gains in the May 6 election left New Democracy and Pasok, which supported the second international rescue in an interim government this year, two deputies short of the 151 seats needed for a majority in Parliament.
Syriza won 16.8 percent of the vote compared with New Democracy’s 18.9 percent. Kouvelis won 6.1 percent giving the party 19 seats. Polls now show him between 5.3 percent and 7 percent.
Kouvelis’s proposal for a unity government couldn’t work after Syriza rejected it, he said, because it would’ve lacked political and parliamentary support. Any agreement on a new government after June 17 would have to be “clear, specific” and in writing, he said, citing conflicting statements made since the election by Syriza members.
“If there is a policy statement, good,” he said. “If not, there can be no agreement because coalition governments to be useful, democratically effective, must be based on a policy statement, otherwise they are ready to collapse from the day of their birth.”
The June 17 elections will be more about the country’s future in the euro than a vote of protest against Pasok and New Democracy, he says.
Polls have consistently shown Greeks want to remain in the euro area. A Kapa poll of 1,016 Greeks on May 23 and May 24 showed that the May 6 election was primarily to “punish” the pro-bailout parties of New Democracy and Pasok, with 66 percent agreeing with that statement and nearly 26 percent saying the vote was about dropping the bailout.
That survey showed that 65.5 percent believed the logic of staying in the euro would prevail at the June 17 ballot, with the same number saying they would stick to bailout terms compared with 24 percent who said it’s be preferable to abandon the currency.
“The great majority of Greeks want a solution, a government and the great majority want to stay in the euro,” Kouvelis said. “And because that doesn’t come from the wave of any magic wand but from policy, that’s why I think they will seek to vote responsibly.”
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