Building up to the perfect storm

By Alexis Papachelas

The fate of the current two-speed, two-message administration will largely depend on the relationship between the government and the country’s lenders. Prime Minister Antonis Samaras sees debt relief talks as the Holy Grail which he expects to take into his hands by about the end of the year. The troika has made it abundantly clear that in order to reach a debt relief deal, the government will have to come up with at least a new mini-social security reform package based on actuarial studies – supposed to be carried out this summer – and a restructuring of the public sector payroll.

In theory, negotiations should start in September and finish by the end of the year, so that whatever measures are agreed to are approved by Parliament before moving onto the debt issue. Could such measures make it through the House, past PASOK’s and New Democracy’s rebel MPs? Cynics believe they will because deputies will not risk losing their jobs to early elections. Others doubt it.

Some believe our European partners will have softened by the fall and not demand additional measures. They even support the theory that Europeans will buy out the IMF and put in the remaining 15 billion euros themselves. Those in the know in Berlin argue that although the German Chancellery is aware that the relationship between Greece and the IMF has soured, it is doubtful whether Germany would ever put up any money to get rid of the IMF and relax the Greek program.

The message coming from abroad is that there is an understanding of the political difficulties but no promises can be made for changes to policy. On the contrary, concerns that the program may be derailed by political developments are escalating.

A likely scenario is that Samaras will...