Coalition row over public broadcaster gets nastier by the day in Greece

Ten days ago, we wrote a blog asking, "Will the closure of the public broadcaster set the scene for a coalition showdown in Greece?" Yes, it has. And it's looking nastier by the day.

Greek coalition leaders met for the third time this week yesterday, but failed once again to strike a deal on the future of the country's public broadcaster ERT. This despite Prime Minister Antonis Samaras offering to re-hire as many as 2,000 old employees to resume broadcasting. Democratic Left, one of Samaras's junior coalition partners, could pull out of government as early as today.

This would leave the government with a wafer-thin majority of 153 seats out of 300 in the Greek parliament, although Samaras could try to win support from some of the 14 non-attached MPs on a case-by-case basis. Not ideal only one year after the coalition was formed, although it could avoid the prospect of snap elections.

Democratic Left MPs are currently in talks with the party's leader, Fotis Kouvelis, to make a decision. An announcement is expected shortly.

How did the problems escalate to this point?

Although the closure of ERT instantly flared up coalition tensions, it does seem surprising that the Prime Minister's party New Democracy (ND) has allowed it to get to this point - where a coalition split is a real possibility. On the surface, it seems it would be simpler for ND to give in and re-open ERT at least temporarily (that is after all what even the Greek Council of State suggested). However, this misses the confluence of problems which the Greek government is currently facing:

• The government is falling well behind on the sacking of civil servants and the necessary savings this delivers. It has agreed to dismiss 4,000 public sector workers by the end of this year and put a further 25,000 into the labour reserve (where they receive a reduced salary). Closing ERT instantly delivers up to 2,600 layoffs - though part of old ERT employees would presumably be hired once the revamped broadcaster is created. The EU/IMF/ECB Troika is ramping up the pressure for clear evidence that these promises will be fulfilled.

• The privatisations programme, due to raise €2.6bn this year, is clearly off track. This is mostly due to the failure to sell the natural gas monopoly DEPA. This funding gap must be filled from within the government's existing budget - and no concrete plans have been put forward so far.

• A further €1bn financing gap has opened up in the National Healthcare Provision Organisation (EOPYY), while the Troika remains unconvinced of plans for a new property tax which was forecast by Greece to boost revenue.

• Furthermore, the IMF could suspend the payout of the next tranche of Greek bailout funds due next month unless eurozone leaders plug a €3bn-€4bn shortfall in the country's rescue package. Compared to the internal funding gaps above, this is an external one which has arisen due to euro area national central banks refusing to roll over their holdings of Greek bonds as had been agreed under the last revision of the Greek bailout (as we reported in yesterday's press summary). Eurogroup Chairman Jeroen Dijsselbloem moved quickly to deny the reports, adding that "the [Greek] programme is fully financed for at least another year."

Therefore, the sum of these factors has escalated the ERT issue into one which could potentially undermine the coalition. The opening up of a new financing gap is hardly surprising, and is actually something we predicted at the start of this year.

As noted above, if the Democratic Left exited the coalition, the Greek government would still hold a majority in parliament, albeit a wafer thin one. Support from the Democratic Left on certain issues could be expected, but would of course no longer be guaranteed.

The Greek government is likely to face some very tough decisions in the near future. An erosion of its power now could make pushing these decisions through significantly more difficult.

The show(down) must go on: Coalition row over closure of Greece's public broadcaster continues

Last week, we noted on this blog that the abrupt closure of Greece's public broadcaster ERT risked opening a rift in Greece's ruling coalition - as Prime Minister Antonis Samaras took the decision without the approval of his junior coalition partners, PASOK and Democratic Left.

Tensions have actually mounted within the coalition, and all eyes are now on a meeting later on today between Samaras, Evangelos Venizelos and Fotis Kouvelis (the leaders of PASOK and Democratic Left respectively). Here's a quick update of what happened over the weekend:

• After both PASOK and Democratic Left hinted at snap elections as a possible outcome of the on-going coalition row over ERT, Samaras came up with a compromise proposal: have a cross-party committee hire a small number of workers so that a basic broadcast service (mainly news bulletins) could resume as soon as possible;

• Samaras's coalition partners have both turned the offer down. They concede ERT needs restructuring, but want the state broadcaster to stay open while such a restructuring takes place;

• This makes today's meeting (scheduled for 5.30pm GMT) very interesting. Venizelos and Kouvelis are apparently not planning to make doorstep statements after the meeting with Samaras, but will wait to speak until they are back at their respective party headquarters - possibly another sign that tensions are running high;   

• German Chancellor Angela Merkel yesterday spoke to Samaras over the phone and reminded him that "it is of vital importance" for Greece to stick to all its commitments with the EU-IMF-ECB Troika, including "those relating to public sector reform." Just a coincidence? Or an invite to Samaras to stick to his guns on ERT closure? 

• Meanwhile, Alexis Tsipras, the leader of the largest opposition party, SYRIZA, is to deliver a speech in Syntagma Square this evening - right in front of the Greek parliament. No doubt he will use it to call for the government to resign.

• Finally, it's worth keeping in mind that ERT workers have appealed to the Council of State - Greece's highest administrative court. The Council of State should issue its verdict later on today, and many expect it to order that ERT be immediately re-opened. Paradoxically, the ruling could help put an end to the coalition row. However, it would almost inevitably also weaken Samaras's position - given that his initial decision to shut down ERT would be overturned.  

We will keep a close eye on any future developments, so make sure you follow us on Twitter @OpenEurope if you want to stay on top of the latest events in Greece.   

And on the second day...

The second day of talks on the formation of the new Greek government has so far seen no major surprises. As we predicted in our response to the election results that we put out yesterday, PASOK leader Evangelos Venizelos' refusal to join a 'national unity government'. unless left-wing SYRIZA were on board, for most part turned out to be political posturing. Things now seem to be heading towards a three-party coalition with election winner New Democracy, PASOK and Democratic Left.

The latest developments:

• As widely expected, both SYRIZA and right-wing populist Independent Greeks have said "Thanks, but no thanks" to New Democracy leader Antonis Samaras' offer to take part in the new coalition;

• Samaras also met Venizelos and Democratic Left leader Fotis Kouvelis yesterday. After the meeting, Venizelos insisted that the best solution would be to have a four-party coalition with SYRIZA in, although he stressed that "the country must have a government by tomorrow [i.e. today]";

• Kouvelis suggested that his party was willing to form part of the new government, although he added that he would sign "no blank cheques" to Samaras;

• Venizelos and Kouvelis (in the picture) met this morning. After the meeting, Kouvelis said an agreement is in sight and could be reached "within hours". A tripartite coalition with New Democracy, PASOK and Democratic Left would hold 179 of the 300 seats in the Greek Vouli - which the European Commission and other eurozone countries could see as sufficient to start talking of minor revisions of the Greek bailout programme; 

• Venizelos suggested that, in parallel to the new government, Greece should also set up a negotiating team to discuss the revision of the bailout terms in Brussels. This group, he said, should clearly include SYRIZA - now the second-largest party of the country. However, SYRIZA has dismissed Venizelos' plan as a "publicity stunt"; 

• Meanwhile, there seems to be a bit of confusion on what Greece could actually achieve from the re-negotiation of its bailout terms - which, according to us, will be a couple of minor adjustments but no changes to the thrust of the agreement. A senior European official is quoted as saying, "If we were not to change the [EU-IMF] Memorandum of Understanding we would be signing off on an illusion. There is scope for revision." He added that a new MoU would be signed "during the summer." However, the prompt reply from European Commission spokesman Amadeu Altafaj Tardio is that "nobody is talking about a new MoU". 

• On a slightly separate note, Die Welt notes that PASOK - the party - is actually proportionally in more debt that Greece itself. It owes banks some €130 million - i.e. 18 times its annual income. Election winner New Democracy is also reported to be heavily indebted. This is partly due to the fact that Greek political parties get state funding based on their share of votes in the general elections, and support for PASOK has been shrinking since its last victory in 2009.