As Greece heads to snap election, political uncertainty looms

Parliament was dissolved on Wednesday and a snap election set for January 25 after the centre-right prime minister, Antonis Samaras, failed thrice to win parliamentary backing for his choice of president

Antonis Samaras, Greece's prime minister, looks on while attending parliament during the final vote for a new president in Athens, Greece, on Monday, Dec. 29, 2014. Greece faces snap elections next month after Samaras failed in his third and final attempt to persuade parliament to back his candidate for head of state. Photographer: Kostas Tsironis/Bloomberg *** Local Caption *** Antonis SamarasShow less

London // Greece faces renewed political upheaval amid blunt warnings that there can be no respite from the reforms that have produced years of painful austerity.

Parliament was dissolved on Wednesday and a snap election set for January 25 after the centre-right prime minister, Antonis Samaras, failed three times to win parliamentary backing for his choice of president – former European Union commissioner Stavros Dimas.

The left-wing Syriza movement is narrowly ahead in opinion polls. Its leader, Alexis Tsipras, has declared that the EU austerity measures, widely blamed for rising poverty and unemployment, “will be history” if it takes power.

He has pledged to renegotiate agreements with Brussels and the International Monetary Fund and demand that a large part of Greece’s massive national debt be written off.

But any disruption to Greece’s attempts to return to economic stability would be seen as a severe setback for the EU’s strategy of imposing financial rigour on countries with long records of living beyond their means.

Wolfgang Schaeuble, finance minister of Germany, Europe’s strongest economy, has warned that Athens will be expected to honour all existing pledges whatever the composition of the new government. “The tough reforms are bearing fruit and there is no alternative to them,” he said.

“We will continue to help Greece help itself on its path of reform. If Greece takes another path, it will be difficult.

“New elections will not change the agreements we have struck with the Greek government. Any new government will have to stick to the agreements made by its predecessor.”

Greece has made modest progress since receiving EU and IMF bail-outs, totalling €240 billion (Dh1.07 trillion), with strict conditions attached, in 2010 and 2012.

The austerity programme linked to the loans was deeply unpopular, provoking violent demonstrations, but the country finally broke free this year from the constraints of six years of recession.

Gross domestic product is predicted to have grown by 0.6 per cent in 2014 but the EU and conservative Greek leaders fear the fragile recovery, achieved at a heavy cost including deep spending cuts in health care, education and other public services, would be choked off if the country descended into political turmoil.

Greece is due to repay €6.7 billion to the European Central Bank this summer. With the banking system on virtual life support, Greek finance minister Gikas Hardouvelis says the ECB could “strangle the economy in a split second” if it withdrew funding.

Holger Schmieding, chief economist at the German multinational Berenberg Bank, sees a 55 per cent chance of the left winning the election.

Mr Schmieding said it was possible that Syriza would moderate its anti-austerity rhetoric once in power. But he told Reuters there was a 30 per cent risk its policies would propel Greece into a rolling crisis and possibly even an exit from the euro zone with money running out and the so-called “troika” of the ECB, IMF and European Commission powerless to help.

However, opinion poll findings cast some doubt on whether Syriza will gain sufficient support to form a government. One survey put the left in the lead with 28.1 per cent, three points ahead of the prime minister’s party, New Democracy.

But a third of those taking part expressed a preference for a coalition led by New Democracy, with support for a Syriza-led coalition lagging well behind. Most polls indicate that no party will win an outright majority. The far-right Golden Dawn party stands in poor third place behind the left and centre-right at under 10 per cent.

Greece has struggled more than other weak European economies, notably Spain and the Irish Republic, in its efforts to recover from the legacy of past overspending.

A combination of waste and inefficiency in the public sector, and routine tax evasion, helped create a budget deficit that still stands at more than €300bn.

Salaries and pensions have been squeezed as part of the austerity package and unemployment has risen to 25 per cent.

Rampant tax evasion by the more well-to-do professional classes has also fuelled deep resentment among ordinary Greeks.

At the height of the 2012 bail-out crisis, British resident Michael Brown, who asked to be identified by a pseudonym, was often urged by education officials to accept payment without documentation when he worked as a drama teacher.

"Plumbers, builders, electricians and so on always had two prices: with or without tax, with or without receipt," he told The National then.

At the time, he and his Greek wife who was a head teacher, were working in the second city, Thessaloniki. His opportunities dried up as a result of belt-tightening in the public services and his wife’s income was reduced by 30 per cent compared to her predecessor in the same job.

Both are now retired, supplementing their pensions from savings, but say there is little sign Greece has learned the lessons of past mistakes.

“We have enough for our needs,” said Mr Brown recently. “But we are still angry at the misery that has been caused by the mismanagement of the Greek political class.”

* Additional reporting by Reuters and Associated Press