May 15 (Bloomberg) -- Prime Minister Antonis Samaras has persuaded investors to buy the story of Greece’s recovery as manufacturing recovers and unemployment starts to fall. Now he has to win over voters.
The premier heads into elections for the European Parliament on May 25 on the back of Greece’s first bond auction in four years and with the economy poised to return to growth later this year. With more than half the country’s youth still without work, polls suggest voters aren’t ready to credit Samaras for the changes just yet.
“The euro crisis seems to be over but its causes have not withered away,” former Prime Minister Costas Simitis of Pasok, the socialist party that dominated Greek politics for three decades, said in a written response to questions. “High unemployment and uncertainty fuel euro-skepticism, while member-states become increasingly reluctant to cede more power to European institutions.”
Four years and three prime ministers after Greece’s then premier, George Papandreou, requested an international bailout in return for budget cuts and an economic overhaul that cost him his job, political instability still haunts Greece. It threatens to undo the coalition led by Samaras’s New Democracy and unravel the fragile progress toward stability he’s achieved.
While New Democracy trails Syriza, the opposition group that rejected the terms of the bailout packages, the bigger threat to the government may be the collapse in support for Samaras’s coalition partner Pasok. Papandreou’s Pasok plunged to sixth place with just 5.5 percent of the vote in a recent poll as voters blame the party for the country’s economic meltdown.
Samaras’s governing coalition has 152 lawmakers in the country’s 300-seat legislature. The prospect of the 27 Pasok lawmakers withdrawing their support could deter the foreign investors helping to fuel the recovery, according to Megan Greene, chief economist at Maverick Intelligence and a columnist with Bloomberg View.
“If there were snap elections and investors were spooked by the prospect of Syriza being the negotiator for Greece, it could really hurt the Greek recovery because it’s so fragile,” she said in a telephone interview.
Greek bonds fell, with the yield on 10-year debt rising 51 basis points to 6.81 percent while the Athens’ Stock Exchange benchmark index dropped 4.6 percent at 5:52 p.m. in Athens today, even as data showed the economy contracting at its slowest pace in four years in the first quarter. Gross domestic product fell 1.1 percent compared with a year earlier, exceeding economists expectations for a 1.3 percent decline.
The economy’s improvement in the first quarter comes after a string of good news for Samaras. The country returned to the bond market last month for the first time since 2010, stocks have risen 15 percent over the past 12 months and yesterday Standard & Poor’s raised its rating on four Greek lenders including the country’s biggest, National Bank of Greece.
Surveys of purchasing managers show that manufacturing returned to growth this year and the European Commission forecasts that the unemployment rate, which peaked at 27.3 percent in 2013, has turned a corner and will fall to 24 percent next year.
Still, a poor showing for Pasok in the election may encourage lawmakers and party members pushing for the ouster of party leader Evangelos Venizelos, a deputy prime minister and former finance minister who is facing dissent within his party from members who oppose the terms of the bailout, as well as from some who support the austerity program. Without his ally Venizelos, Samaras might struggle to keep Pasok in the coalition.
Judged by Voters
“In these elections we will all be judged, both those that are in this room and those that aren’t,” Venizelos said in a May 9 speech to his lawmakers, taking a swipe at his critics.
Pasok, which stands for Panhellenic Socialist Movement in Greek, was founded in 1974 by Papandreou’s father Andreas, when he returned from exile in the U.S. after the fall of Greece’s military dictatorship. It has borne the brunt of popular dissatisfaction against budget-cutting measures imposed since the first bailout in May 2010. The party won just 12.3 percent in the June 2012 election, less than three years after Papandreou was elected prime minister with 43.9 percent.
In the May 10 Kapa Research survey for To Vima newspaper that saw Pasok fall to sixth place, Syriza led New Democracy by 23 percent to 21.7 percent. The pollster questioned 1,149 people between May 6 and May 9.
Anther poll today by VPRC for Epikaira magazine gave Syriza a 3 percentage-point lead over New Democracy and placed Pasok seventh with just 3 percent. VPRC surveyed 1,003 people on May 9 and May 13 and gave a 3.1 percent margin of error.
While the parliamentarians chosen in the vote will join negotiations over completing the European banking union and consider proposals for forging a political union, some of those campaigning are treating the election as a plebiscite on Samaras’s government, said Antigone Lyberaki, an economics professor and candidate for the Drassi party, which supports Greece’s economic adjustment program.
“We’re treating these elections as if they were a super opinion poll for national elections,” Lyberaki said in a May 13 telephone interview. “Reducing this to a choice between austerity and Syriza does a disservice to the guy in the street who’s in favor of Europe but has been brought to his knees by taxes.”
Syriza is trying to consolidate its support after the 2012 general election propelled its leader Alexis Tsipras into the international spotlight. The party aims to use a victory in the European elections to try to reverse the budget cuts that were imposed as a condition of Greece’s two bailouts.
“Syriza wants a clean victory in order to put an end to the catastrophic path of one-sided austerity and great depression,” Dimitris Papadimoulis, a Syriza candidate, said in an interview. “If Syriza gets a comfortable victory, or, even better, more than the sum of votes of New Democracy and Pasok, then we will see positive political developments.”
Greece’s political geography still remains in flux after two general elections in six weeks in 2012 that threw the country’s membership of the single currency into doubt after it had completed the world’s biggest sovereign debt restructuring. Samaras emerged from those votes to lead a country that’s lost a quarter of its gross domestic product in six years of recession and where unemployment is at 26.5 percent.
“Greece used to have a very stable political landscape,” said John Loulis, an Athens-based political analyst and communications strategist. “But the landscape has shifted dramatically. There is a big chance that we may see surprises the night of the elections.”