Was the Greek government right to call a snap Presidential election?

Open Europe's Raoul Ruparel asks this question over on his Forbes blog, concluding it was probably the correct political choice but that plenty of risks remain in the process. Full post below:

The news out of Greece has been improving slightly in the past few months in a welcome change from the trend of bleak economic and political news out of the struggling Eurozone state. However, the next few months could see the country reverting to trend somewhat.

Eurozone finance ministers agreed yesterday to allow Greece a technical extension of 2 months to its bailout which is due to finish at the end of this year. This is to allow the final quarterly review of the bailout to be completed – a necessary step to ensure the reforms are in place which in turn will allow for release of the final cash payment from the Eurozone.

Following the agreement, the Greek government announced that it will hold the first round of its Presidential election on 17 December, moving it up from February.

Together these announcements have crystallised some long standing economic and political risks for Greece going into the New Year. However, there are some key questions which spawn from these decisions and also some further risks which remain unanswered, I outline them below.

How does the Presidential election work and what is the likely outcome?

• The President (a largely ceremonial role) is elected by the Greek parliament. In the first or second round the candidate must gain 200 out of 300 votes from MPs. If this is not done then he needs 180 in the third round. If no candidate is found after three rounds, snap general elections are called (these would be around the end of January if they did happen).
• Currently the New Democracy and Pasok coalition holds 155 seats, while the opposition Syriza party has refused to back a joint candidate (a compromise often used in the past) since it is leading in the polls and wants snap elections.
• The government today announced former European Commissioner and Greek Foreign Minister Stavros Dimas as its candidate. 
• There is a chance that the government can gain the 180 seats – many of the smaller parties and independent candidates would lose seats to Syriza in a new election and therefore want to avoid having one. Currently, Greek officials put the chance of success at around 50:50 (not exactly inspiring but better than some had expected previously).

What questions still need to be answered?

• It remains unclear exactly how the extension of the bailout will play out. It is assumed the two sides will reach an agreement as before, with Greece eventually pushing through tough reforms. This is probable again but not guaranteed – the room for manoeuvre for the government is limited by the threat of elections. There is only so much they can do without harming their vote share further. Furthermore, the coalition partner Pasok is almost wiped out as a political force and therefore is scrambling for some way to boost its presence. This could lead to radical choices with an election looming.
• There has also been little progress on exactly how Greece will fund itself for next year. The Eurozone has said it is supportive of granting Greece an precautionary credit line – but this is complicated by a number of factors, not least that it is not very precautionary since it seems almost guaranteed that Greece will need to tap it.
• Furthermore, the involvement of the IMF remains unclear. Greece harbours significant resentment towards the IMF and wants to move away from their funding, even though they are still due to pay out another €9bn in 2015 and 2016. If they stay, they will need guarantees that Greece will be able to fund itself for 12 months, and if they leave their funding stream will need to be replaced.

Was the government right to move up the vote?

• It is a risky play, but I think it was probably the correct decision (at least from a political perspective). The key reason is that the uncertainty around what comes after the current bailout (which now ends in February) takes some power away from Syriza. The government has proven it can negotiate with the EU/IMF/ECB Troika and has a track record of managing crises. Syriza does not. As we have seen in Greece over the past few years, fear of uncertainty and possible increasing the chance of Grexit once again can be an important factor in peoples’ voting and thinking.
• Furthermore, the ideal position for Syriza is that a follow on programme would have been negotiated before the vote on the President and potential elections. This would have provided certainty and a platform which Syriza could try to negotiate a new bailout programme and a restructuring of Greece’s debt.
• One key question which remains unanswered is, what would happen if elections take place and Syriza win? While Syriza claim to support euro membership they want a fundamental change in the way Greece approaches European issues. Notably they want a debt restructuring and a complete overhaul of the programme for reforms and consolidation in Greece which accompanies the bailout (or presumably which would tie into a restructuring). This seems very unlikely to materialise, but it is not clear if they would push for a Greek exit from the euro if their demands are not met or if they would temper their position.
• All that being said, if this doesn’t pan out, then Greece will face elections early next year, in a climate of serious uncertainty with no clear plan to exit the bailout. Then again, this was always the risk and may always have materialised.

Overall, risks are coalescing in Greece once again. The fundamental questions over how to fund Greece in the medium term (as it economy tries to recover) or how it will continue to deal with incorrect interest rates and a too strong currency have never been answered. The government’s plan to move up the election is a risky one but politically probably the correct option. Ultimately, the next few months will be a bumpy ride for Greece, but the wider Eurozone should not be too affected since it has plenty of buffers in place to deal with such a crisis.

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.   

Will the closure of public broadcaster set the scene for a coalition showdown in Greece?

Imagine a Number 10 spokesperson announcing during the afternoon news bulletin that the BBC has become too expensive to run and will be shut down with immediate effect. You would be excused for thinking that the Government and the Corporation have joined efforts to take you for a ride.

Well, this is exactly what happened in Greece - and it wasn't a joke. Greek government spokesman Simos Kedikoglou went on TV yesterday afternoon to say that the country's public broadcaster ERT would go off the air a few hours later, because it had become a "refuge of poor transparency and waste."

As a result, ERT's almost 3,000 employees have been temporarily laid off. The Greek government says that a revamped and slimmed-down broadcaster (NERIT SA) will be up and running by the end of August. Protests were staged outside ERT's headquarters yesterday and are continuing today, while ERT journalists are still putting programmes on air via digital frequencies and the internet.

A couple of points are worth making at this stage:

• The decision to shut down ERT is clearly linked to Greece's commitment to firing 15,000 public sector workers by the end of next year under its EU-IMF bailout deal, although it's up to the Greek government to choose where to cut. Therefore, it's probably not entirely fair to blame the Troika for this (admittedly pretty extraordinary) decision;

• The fact that the Greek government prefers shutting down ERT altogether and then opening a brand-new company, instead of trimming the existing company down, could be seen as further evidence of how difficult it is to fire public sector workers in Greece - even in cases where inefficiency and waste are evident (at least according to what the Greek government spokesman said);

• On the domestic politics front, Greek Prime Minister Antonis Samaras has decided to go ahead with the closure of ERT despite open opposition from his coalition partners - PASOK and Democratic Left. The latter now want to submit a draft bill to scrap the decision, meaning that there is a risk of a coalition split - unless someone blinks.  

As the Troika has long suggested, it is clear that Greece's bloated public sector needs to be downsized significantly. That said, it is also clear that this situation has been poorly handled, particularly given the wider political and social tensions already at play in the country. The fallout of this story might be worrying - further splits in the governing coalition and wider public backlash against an austerity programme for which there is already very little buy-in.

We will keep monitoring the situation and give further updates on Twitter @OpenEurope.

The 'forgotten man' of the euro crisis catches a break...

While everyone is gearing up for the EU's 'Super Wednesday', Portuguese Finance Minister Vítor Gaspar has made a quite important announcement. As we anticipated in our daily press summary more than two weeks ago, following its fifth monitoring mission to Lisbon, the EU-IMF-ECB Troika has decided to give Portugal one extra year to make the budget cuts agreed under its bailout programme.

The 'forgotten man' of the euro crisis will therefore be allowed to close the year with a deficit of 5% of GDP (instead of the previously agreed 4.5%). Portugal will then have to cut its deficit down to 4.5% of GDP (instead of 3%) next year and to 2.5% of GDP in 2014. No doubt the one off transfers from pension funds to push the deficit below previous targets finally caught up with them. 

The news is particularly interesting - and not only because Portugal seems to have fairly easily achieved what Greece has failed to obtain so far, despite Greek Prime Minister Antonis Samaras's recent 'diplomatic offensive'. In fact, Portugal is still expected to return to the markets in September 2013 (exactly one year from now). Given that the country has been allowed to run a larger deficit for this and next year, this suggests that it will have to borrow more money to cover for it.

For the moment, Gaspar has made clear that nothing has changed on that front, and Portugal will try to raise the money from private lenders (i.e. will not ask the EU and the IMF for more cash).

However, this brings us on to another interesting fallout from the ECB's new Outright Monetary Transactions (OMTs). Since currently bailed out countries, such as Portugal, can access support from the ECB when they are due to return to the markets, there is a good chance that the ECB could buy up some existing Portuguese debt from the secondary markets in September 2013, allowing banks to reinvest this money in the  new debt Portugal will issue. This also allows Portugal (and the eurozone) to sidestep the IMF's demand that countries be able to show clear funding streams for 12 months (which led to the second Greek bailout request).

So, despite delaying its deficit target and not being guaranteed market access within twelve months, Portugal looks able to avoid a second bailout with the help of the ECB (at least for the moment). One should now only ask whether the conditions attached to the Portuguese bailout programme will satisfy the ECB, especially after they have been eased...

While everyone is talking about Greece...

It may sound incredibly obvious, but the eurozone crisis is not only about Greece. Yes, Athens may be facing its "last chance" (Juncker dixit) to save its euro membership. And yes, the diplomatic offensive launched by Greek Prime Minister Antonis Samaras (see picture) to obtain a two-year extension to the EU-IMF adjustment programme clearly deserves attention.

However, while everyone is talking about Greece, quite important (and not necessarily good) news is coming out of other eurozone countries - of which, as usual, we also offer a comprehensive overview in our daily press summary.

In particular:

• According to sources quoted by Reuters, the Spanish government is in talks with its eurozone partners about the eurozone’s temporary bailout fund, the EFSF, buying Spanish bonds – but has made no final decision over whether to request the assistance. Unsurprisingly, the European Commission said that there are no negotiations under way, and a bailout request from Spain is not expected "any time soon". Right...

• According to a high-ranking official at the Portuguese Finance Ministry quoted by Jornal de Negócios, Portugal (the 'forgotten man' of the euro crisis) will not be able to meet the EU-mandated deficit target of 4.5% of GDP for this year unless new austerity measures are adopted. The main reason seems to be the sharp fall in tax revenue: -3.6% during the first seven months of the year, as opposed to the 2.6% increase the Portuguese government was betting on for 2012. The alternative, the Portuguese press suggests, would be asking the EU-IMF-ECB Troika to relax the target. Boa sorte with that one, especially since in September we will hit the point where Portugal is within one year of being expected to return to the markets. Remember how the IMF's requirement for a country to be funded for twelve months played out in Greece... 

• A Cypriot government spokesman told reporters yesterday that the island's public deficit at the end of the year will be around 4.5% of GDP – significantly higher than the 3.5% of GDP initially forecast. Clearly not good news, as this will almost certainly increase the EU-IMF bailout Cyprus is currently negotiating. Another headache for the Troika, which is due to visit the island again shortly (although no clear date has been specified yet).

• New figures published by the Irish Central Bank show that €30.5 billion or 27.2% of the €112 billion outstanding in owner-occupier mortgages at banks in Ireland was in arrears or had been restructured at the end of June, up from €29.5 billion (26%) in March. Furthermore, German Finance Minister Wolfgang Schäuble told the Irish Times that he will oppose any debt-relief plan for Ireland that “generates new uncertainty on the financial markets and lose trust, which Ireland is just at the point of winning back.”

Add the German Constitutional Court ruling on the ESM treaty along with the Dutch general elections (with the EU-critic Socialist Party led by Emile Roemer ahead in the polls) into the mix and it really looks like there will be little room for boredom in September.

The Greek government and the Troika - not quite the stand of the 300

How would you feel right now if you were a government ‘swing’ voter in Greece?

Following its very first meeting with the EU/IMF/ECB troika the new Greek government looks to have abandoned its hope for renegotiation, at least in the short term. Finance Minister Yannis Stournaras announced:

“The [Greek reform] programme is off-track and we can’t ask for anything from our creditors before we get it back on course.” 

In May we predicted that "given the huge stakes, it may well be the Greek parties that blink first".Well, they may just have done precisely that.

We’re not disputing that the Greek programme is off track – following months of delays from the elections and the near impossibility of achieving the cuts in the first place, even imagining it would be anywhere near on target would have been frankly living in a dream world.

However, there are swathes of voters who switched from anti-bailout parties and smaller groups to support this new coalition on the back of promises of 'responsible' renegotiation. The fact that after the first meeting and only a few weeks in office the government looks to have already folded may be a slap in the face for many. The nature of the U-turn may also be difficult to swallow. Press reports suggest that Prime Minister Antonis Samaras was hesitant to make any requests (following some frosty comments by IMF Director Christine Lagarde) and looked more to highlight the increase in privatisations – a significant change in tact even if it is a good if difficult to achieve aim.

As we always suggested, renegotiating will be tricky and the prospects for Greece in the euro look increasingly unsustainable. But this could also add another layer of political and social problems. Firstly, it is an open goal from opposition leader Alexis Tsipras who has railed against the bailout and the nature of the government politicians (part of the failed ruling elite according to him). He even made the direct accusation that they would not stick to their promises for renegotiation – clearly this will only put wind in his sails. Secondly, those voters who supported the government in good faith, trying to balance their support for the EU and the euro with the economic troubles they face, may find themselves increasingly disillusioned.

It’s early days but if the government continues along this line we wouldn’t be surprised to see an increasing number of protests and even more rioting. The next polls should be revealing and again we would hazard a guess that Tsipras may turn out to be the big winner from all this. In the meantime it seems that the Greek economy and people will continue to struggle along with little light at the end of the tunnel.

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. 

The Greek Crisis: Five Key Developments

The decision on the second Greek bailout has been put on ice until (at least) next Monday, but things are moving fast in and around Greece these days - so here are yesterday's five key developments in the Greek crisis:

• A new poll published by Greek magazine Epikaira confirmed that the Greek electorate is moving towards the extremes of the political spectrum. New Democracy - the centre-right party led by Antonis Samaras - is credited with 27.5% of votes, while former Greek Prime Minister George Papandreou's PASOK lags well behind with 11%. In total, the two 'mainstream' parties would therefore get 38.5% of votes. The Greek Communist Party, Democratic Left and the Radical Left Coalition (SYRIZA) are credited with a combined 43.5% of votes, but the first has ruled out entering a coalition with the other two hard-left parties. These results are clearly very significant, not least because they will give Germany, Finland and the Netherlands fresh impetus to argue that Greece's smaller parties should also provide written commitments to austerity. Unfortunately, as we point out in our latest briefing, at the moment it's quite hard to see any of these parties agreeing to such a request;

• PASOK's Michalis Chrysochoidis, Greek Minister for growth and competitiveness (definitely an unenviable post), told reporters in Frankfurt that his party is "in favour of an extension of the life of [Greek Prime Minister Lucas] Papademos’s government...Elections should take place by the end of the constitutional term in 2013." Incidentally, Germany, Finland and the Netherlands reportedly brought up the possibility of postponing the Greek elections during Wednesday's conference call of eurozone finance ministers;

• Greek President Carolos Papoulias' anti-Schäuble invective didn't go unnoticed in Germany. CDU MP Christian von Stetten yesterday said that, without the German Finance Minister, Greece would already have been bankrupt a long time ago. The Greek President's intervention, he went on, was "unthinkable" and "absurd". Most significantly, Mr von Stetten said that Papoulias' words would "certainly impact" on the Bundestag vote on whether to approve the second Greek bailout, due on 27 February;

• According to Die Welt, the ECB has started the announced swap of its €50 billion Greek government bond holdings for new Greek bonds. The ECB is swapping the bonds at their nominal value, meaning that it is making profits out of them. These profits will then be distributed via national central banks to eurozone governments, which will have to decide whether they want to return the money to Greece as part of the second Greek bailout. The swap will be reportedly completed by 20 February. We will expand on this specific point later;

• Separately, Schäuble is also said to have rejected the idea of providing Greece with a bridge loan to avoid the country defaulting on 20 March - when Greece needs to redeem €14.5 billion worth of its debt - and uphold the rest of the second Greek bailout until after the elections as a means to maintain pressure on Athens.

Lots of stuff going on, and not all is necessarily good news. As usual, if you want to stay on top of the eurozone crisis, we recommend that you check out the €uro-Zone section of our new website and keep following us on Twitter @OpenEurope.

Liaising With The Right People?

Antonis Samaras (see picture), the leader of Greece's centre-right New Democracy party, has made people in Athens, Brussels and elsewhere sweat quite a bit with his aversion to giving a written commitment to the latest austerity package.

However, he has finally bowed to pressure. Here is a link to the letter Samaras sent to the European Commission, the ECB and the IMF to reassure them that he will stick to the latest round of austerity measures adopted by the Greek parliament on Sunday if he wins the next general elections in April.

Predictably, media reports are focusing on the following part of the letter,

If New Democracy wins the next election in Greece, we will remain committed to the [Greek Stabilisation] Programme’s objectives, targets and key policies.

Given that former Greek Prime Minister George Papandreou has already sent over to Brussels a similar commitment on behalf of his Socialist PASOK party, on the surface Greece seems to have made another crucial step towards its second bailout.

However, doubts remain over the strength and the actual relevance of the commitment sought by Greece's public lenders. Firstly, as Samaras specifies in his letter,

Prioritising recovery along with the other objectives, will only make the [Greek Stabilisation] Programme more effective and the adjustment effort more successful. Therefore...policy modifications might be required to guarantee the Programme’s full implementation. And, once again, we intend to bring these issues to discussion along with viable policy alternatives.

Indeed, this is supposed to happen "strictly within the framework outlined by the Program, so that the achievement of its objectives will not be put at risk." Still, this reads like a clear hint that, at some point, Samaras may want to give a boost to Greece's public spending in the name of economic recovery.

Secondly, and most importantly, are the Commission, ECB and others really liaising with the right people in Greece? In other words, is a written commitment from only PASOK and New Democracy enough to ensure that Greece will keep doing its homework regardless of who wins the next elections? According to the latest opinion polls, the answer seems to be a 'no'.

In fact, Samaras' party is currently polling at 31% - definitely not enough to secure an absolute majority in the Greek parliament. The problem is that New Democracy's 'natural' ally in a hypothetical coalition, the far-right LAOS party, recently withdrew its support for Lucas Papademos' technocratic government precisely because it didn't want to back the latest round of austerity imposed on Greece.

Crucially, the polls show that not even a German-style (unlikely) Große Koalition between New Democracy and Papandreou's PASOK would be enough. With PASOK credited with only 8% of votes, the two parties would put together less than 40% of votes - still not an absolute majority.

In other words, Athens' public creditors seem to have lost touch with the political reality in Greece. And the reality is that, as the two 'mainstream' parties are increasingly seen as mere executors of the requests coming from the EU, Germany, France and others, the Greek electorate is moving towards the extremes of the political spectrum. As the FT's Gideon Rachman points out, three far-left parties account for 42.5% of the votes - so potentially more than New Democracy and PASOK together.

Perhaps the European Commission should try and pick up its interlocutors a bit better. Or, perhaps, people in Brussels think that Greek voters will feel 'encouraged' to vote for either New Democracy or PASOK as they are the only two parties which can make sure that Greece gets its second bailout...

Not Sure They Really Deserve It...

On his Coulisses de Bruxelles blog yesterday, French journalist Jean Quatremer offered an interesting insight into what Greek MPs earn. In light of Greece's current economic situation, the figures reported by Libération's Brussels correspondent are somewhat disturbing.

Apparently, the net monthly salary of a Greek MP can reach up to €8,500 (yup, you read that right). On top of this, the lucky members of the Greek Vouli are also entitled to:

• An expenses allowance of €4,900;
• An allowance of €1,200 for participation in parliamentary committees (but surely, sitting in committees is part of an MP's job?);
• An accommodation allowance of €1,000 (for MPs travelling from outside Athens);
• An office allowance of €1,800;
• Free transport.

To put these figures into context, according to EU Economic and Monetary Affairs Commissioner Olli Rehn's spokesman, the average minimum wage in Greece is €871 a month (still surprisingly higher than Spain, €748, and Portugal, €566, but that's another issue).

But salaries and allowances are not the only things likely to anger Greek citizens. Since last year, Quatremer notes, the annual income and properties of Greek MPs must be published on the Greek parliament's website.

For the record, here are some interesting details on the annual earnings of the two top Greek politicians (figures are from 2009 and are also mentioned by Greek newspaper Kathimerini, see here).

George Papandreou (former Prime Minister, leader of socialist PASOK party):

• An annual gross salary of €122,114
• Other "miscellaneous revenues" worth €6,926
• Savings worth €61,379
• A house in Athens
• A stock portfolio of €228,000 owned by his wife

Antonis Samaras (leader of centre-right New Democracy party):

• An annual gross salary of €107,150
• Other "miscellaneous revenues" worth €110,695
• Five plots of land and a flat (whose value is not specified)
• Savings worth €285,467 deposited in a Belgian bank, plus a further €8,952 deposited in a Greek bank
• 3,500 shares in a ferry company

If we were Greek voters we wouldn't take much confidence in the fact that leading politicians felt the need to deposit the majority of their savings outside the country.

There is clearly something wrong in a place where 'normal' citizens have either been lost their jobs or faced a series of pay cuts over the last two years, while the political class - which certainly bear a good deal of responsibility for the conditions Greece finds itself in - continues to ignore the option of substantially reducing their own salaries. It wouldn't do a whole lot to solve Greece's debt problems, but it would still surely be the right thing to do.