Archive for May 2012
Yesterday, the Greek government announced the budget execution to April. The headline numbers are looking promising, with the budget deficit at 1.7bln, well below the target of 3.3bln and almost cut in half from the same period last year when the deficit stood at 3.6bln.
However, when one goes past the headline, the budget execution is particularly problematic and the new government that, hopefully, will be formed after the June 17 elections will face serious challenges keeping it on track.
Victim to the ever deepening recession, the state revenues continue their downward trend, already 495mln below the target, and it is only because of a tight control over primary expenditures and public investment spending that the deficit is below the target to date.
The result of May 6 elections in Greece led to a complete reshuffling of the local political dynamics, shook the relative calmness post the completion of the PSI and brought back with intensity on the agenda the country’s exit from the euro zone.
The undisputed momentum of the radical left party of SYRIZA, combined with the inability of the local political establishment to handle the outcome of the elections in a nationally united manner, will most likely lead to a repeat election mid June and potentially in a prolonged period of political instability and governance void.
SYRIZA’s leader Alexis Tsipras, whom polls last week saw in the first place in the event of an elections re-run, has a revolutionary view of Greece’s relationship with the troika, combined with some radical proposals in terms of the country’s fiscal response to the crisis. This has brought back the stand-off between European officials, in particular Germany, and parts of Greece’s political establishment.
Cornerstone to SYRIZA’s ideological platform is the belief that Greece has a strong negotiating position on the basis that it will never be left or pushed to abandon the euro because such a development would have severe implications for the entire eurozone, already in fragile condition after Spain’s troubles have been added to the mix.
On the other side of the argument, there are those who believe that the euro has now built strong defences to withstand such a shock with the ability to contain the impact.