Government retains slim majority
Greece coalition sees junior partner defect
21/06/2013 - 6:43pm
Greece's fragile coalition government suffered a serious blow on June 21 when Democratic Left, the smallest of the three parties making up its ruling coalition decided to pull its ministers from the cabinet following a falling-out over the snap closure of state broadcaster ERT last week by Prime Minister Antonis Samaras. The other junior partner, the Panhellenic Socialist Movement (PASOK) has decided to stick with New Democracy. But the two have a slim majority of two and any effort to pass highly controversial legislation in order to fulfil the terms of the countries 240bn euro international bailout is likely to be treated as a confidence vote.
The news raised further fears over Greece's bailout program. The country agreed to introduce strict spending cuts and reforms. It is already running behind on pledgs to slim down to state and fix its inefficient tax system, open up markets and professions and modernise.
Olli Rehn, the European Union's Economics Commissioner, urged Greek leaders on June 21 to concentrate on "policy rather than politics." "It would be very important to stabilize the political situation in Greece now," Rehn said. "Immediately. And really concentrate all energy on implementation of the program to meet the milestones."
The EU, the European Central Bank and the IMF make up the so-called troika of international organisations administering the mammoth bailout.
Democratic Left's departure from the coalition came after the leaders failed to use three top-level meeting and two judicial decisions to come to an agreement about what to do with the state broadcaster. The courts have said that an interim public broadcast must resume until the government sets up the organisation that will take over from now-defunct ERT. Democratic Left appeared to demand that ERT in its present form take on the task while the other two wanted a slimmer, leaner outfit.
The abrupt ERT shutdown shocked Greeks, prompting protests outside the ERT headquarters in Athens, and was criticized abroad as a blow to press freedoms and democracy.
Fearing further political chaos, markets in Athens and abroad that had not yet recovered from the Fed's admission that its quantitative easing policy may soon be coming to an end, reacted sharply to the news. In Greece, the stock exchange index fell by 6%, Germany's DAX was down 1%, while the CAC-40 in France fell 0.5%. The FTSE 100 index of leading British shares was 0.4% lower. The euro was a notable casualty too, trading 0.7 percent lower at $1.3137.
So far there are already delays on a pledged overhaul of the state and the inefficient tax system, liberalizing markets and further cutting spending. Further political chaos could hamper the promised austerity measures.
Analysts say that developments in Athens provided investors with a clear reminder that the country's problems are a long way from being fixed.
"The euro area's problems are back in the spotlight with an all-familiar cast," said Neil Mellor, an analyst at Bank of New York Mellon. europe on line
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