Prospect of Greek electoral stalemate scares business world

Prospect of Greek electoral stalemate scares business world

ATHENS - Greece had been expected to finally limp out of recession after six painful years in the red, before it was unexpectedly plunged into a snap general election set for Jan 25.

Now, with a clear electoral result far from certain, the long-suffering Greek business community fears that any chance of a tentative recovery will be delayed - if not killed off outright - by a damaging political stalemate.

"Banks have begun to stir in helping enterprise, but the elections have put everything on hold," said Haris Makriniotis, head of a think-tank named Endeavor that helps business startups.

"For the business community, the key requirement is to quickly have a government in place, no matter who it is, and especially to avoid a follow-up ballot," he told AFP.

In 2012, back-to-back elections were needed to form the current government, leading to weeks of political uncertainty.

There are fears of a repeat performance this time given the close race between Prime Minister Antonis Samaras' conservative New Democracy party and Syriza, the resurgent anti-austerity movement that wants to renegotiate Greece's EU-IMF bailout.

Opinion polls indicate Syriza leads New Democracy by around three points - but the intentions of one in 10 voters are still unclear.

"This is not Belgium" where the country functioned for five months before a government was formed, said Vassilis Korkidis, head of the confederation of Greek commerce.

"We will not be able to hold out for months without a government," he said.

Fragile recovery

In the space of six years, Greece lost a quarter of its national output as economic sentiment was squeezed by a barrage of layoffs, tax hikes and wage cuts.

It was expected to register a growth rate of 2.90 per cent this year.

But economist Jens Bastian says the recovery was mainly based on tourism, which posted two successively strong seasons in 2013 and 2014.

"This tentative recovery is too fragile and not sufficiently spread out among other sectors of the economy," he said.

The austerity measures - designed to trim the country's runaway public deficit - were mandated by the European Union and the International Monetary Fund, which bailed out Greece with twin loan packages worth a total of 240 billion euros (S$370 billion).

A coalition of social democrats, Marxists and Trotskyists, Syriza has toned down much of its anti-capitalist rhetoric in recent weeks and has reached out to market investors.

The party's 40-year-old leader Alexis Tsipras has also penned articles in German and Italian newspapers to point out that his party is no fiscal bogeyman.

But Syriza remains committed to a drastic renegotiation of the EU-IMF bailout, which it says is stifling recovery, and to erasing more than half the country's enormous debt.

"We call for the restructuring of the debt so that it can be serviced in a socially viable way," Tsipras said in a TV interview on Monday.

The plan "includes erasing most of the debt," he told Star TV.

The leftist party also intends to spend 12 billion euros on boosting the country's recovery, utilising European structural support funds and money already earmarked by the EU for bank aid.

They insist that Greece's European partners, and Germany in particular, have realised that austerity has failed - particularly amid a broader trend of deflation in Europe - and will not refuse a renegotiation.

Analysts note that even if Syriza were to win it would still probably need to form a coalition, and to do so, it would have to water down its demands to find a partner.

Syriza has dismissed warnings that its electoral programme would rattle markets and creditors, but the IMF has suspended further bailout payments to Greece until a new government is formed.

The European Central Bank has also announced that further support to Greece's banks is conditional upon Athens completing a stalled EU-IMF fiscal audit and committing to a follow-up.

The outgoing government had arranged a two-month extension to the audit until Feb 28.

The Greek central bank has insisted that the country faces no liquidity shortage, but the arrival of a new government - and especially one opposed to the current bailout framework - is certain to delay talks.

"The timetable is tight," a European source said this week "A Greek government is unlikely to be formed before Feb 10, and this does not leave enough time for issues to be settled before the end of February," the official added.

The Greek finance ministry has warned that Syriza would face a rapid cash shortage should it win the election and then challenge the country's EU-IMF creditors.

The ministry said Greece has already exhausted a 15-billion-euro cap on treasury bill sales and would need the consent of its EU and IMF creditors to sell more.

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