Our Opinion: 2023
Growth in Greece
It was a real joy to visit Greece last week and, for the first time, visiting the country at a time of economic confidence, rather than chaos.
On 21st May, Greece experienced a political earthquake as the governing centre-right New Democracy party resoundingly beat its left-leaning opponents in national elections. New Democracy won 41% of the vote, compared with only 20% for Syriza, the main opposition party. The margin was far larger than opinion polls had predicted, and while New Democracy was just five seats short of an overall majority, the result suggests that it is likely to win an outright victory in another election this month under a different system that give bonus seats to the party with the most votes.
The scale of New Democracy’s victory is striking given that it took place in the aftermath of a disastrous train accident in February, in which more than 50 people died. There is also an ongoing investigation into a wire-tapping scandal in which the intelligence service spied on politicians, journalists, and businesspeople. However, New Democracy benefited from its perceived solid record of restoring economic stability, especially given the fact that Greece is no longer under post-bailout surveillance by the EU and is set to grow by 2.4% this year, above the forecast eurozone average.
However, whilst New Democracy’s market-friendly reforms may have delighted banks and investors, and even reassured the comfortable middle classes, the less well-off continue to suffer the dire consequences of sustained austerity. The Greek economy is still about 20% smaller than it was before 2008, while levels of poverty and social exclusion are still among the highest in Europe. The unemployment rate is nearly 11%, but annual inflation is back down at only 3%.
The election was a resounding strategic defeat for Syriza, which saw its support collapse, even compared with the final opinion polls. The party has made several big blunders over the past few years, including the decision to introduce a pure proportional system when it was in power, as well as basing its campaign around attacking the current prime minister. When it come up with new policies, these were pitched towards a hardcore, fanatical audience rather than more moderate voters.
There is a very real possibility that Syriza may be pushed into third place by the centre-left PASOK at the next election. If this happens it could mark the end of a major political cycle that began with the 2008 banking crisis, with potential consequences that extend beyond Greece, and into the broader European political landscape. At the very least, the future of the populist left-wing movements that challenged the status quo in the 2010s all around the continent now seem increasingly doubtful.
Syriza ran the country from 2015 to 2019, a time when Greece came close to defaulting on its debts, crashing out of the Euro and threatening the stability of the entire Euro-zone. Mr Mitsotakis then took over. Now Greek voters have decided, by a significant margin that they prefer stability and technocratic competence to drama.
Over the past four years, Mr Mitsotakis has governed, for the most part, with energy and skill. The economy has bounced back better than most from the disasters of covid-19 and the energy-price shock; its growth rate last year was around twice the Euro-zone average, and is forecast to exceed it comfortably this year too.
The mission of modernising Greek government has a long way to go—and Mr Mitsotakis will have his work cut out in a second term. But he clearly deserves one.
2nd June 2023
