Making political and economic progress
Greece’s political and economic environment improved during the period under review, largely owing to the fulfillment of the final requirements of the Third Economic Adjustment Program for Greece (2015 – 2018), the emergence of timid economic growth and the smooth change of government in July 2019. In comparison to the previous government (Syriza-ANEL), the incoming New Democracy administration appeared far more willing to correct missteps in various policy sectors such as pensions, migration and higher education, and to introduce reforms.
as elections loom
as elections loom
During the period under review, the previous government, consisting of a coalition of the radical-left Syriza party and its minor coalition partner, the rightist nationalist ANEL party, was on its way out. The coalition government’s performance was uneven and mixed.
Coalition strife over foreign-policy agreement
On the one hand, the ANEL party left the coalition after Syriza notched its most important foreign-policy success in the winter of 2018 – 2019. This success was the negotiation and ratification of the so-called Prespes Agreement, which Greece made with its neighboring country, North Macedonia, with the aim of resolving the almost 30-year-long dispute over the use of the name “Macedonia.”
Delay in large-scale investment projects
On the other hand, until it lost power in July 2019, the Syriza-ANEL government delayed implementation of agreements it had signed with private investors on gold-mine exploitation in northern Greece, and for urban and tourist development along the east coast of Athens. For its part, the new government was eager to facilitate private investors, but soon encountered the legal difficulties and bureaucratic impediments typical of large-scale investment projects.
Return to international markets
However, Greece was at last able to borrow funds on the international markets. Capital controls were completely lifted, but the Greek banking system continued to face risks, as non-performing loans remained a major constraint.
In the July 2019 elections, the New Democracy party won 39% of the total vote, capturing an absolute majority of parliamentary seats.
Policy shift toward
In contrast to its predecessor, the new government abstained from any temptation to influence the media and the judicial system; reversed the populist higher-education reforms made by the previous government as its term of power was expiring; tried to rationalize the most problematic aspects of the pension reform that had been rolled out since 2016 with little success; and made changes in labor law and taxation to spur private investment, which owing to high levels of taxation and very rigid employment regulations, had been sluggish over the past few years. Such policy shifts did not seem to affect the popularity of the new government in the summer and fall of 2019.
However, during that same period, the new government was faced with a new migration crisis, with the numbers of incoming migrants and refugees swelling. However, the new government cannot count on the Greek state’s capacities to meet this and other policy challenges (e.g., in economic development and education reform), as the weak state administration continues to hamper reform efforts. Meanwhile, as the year 2019 was drawing to its close, the government’s initiative to transfer refugees from the islands of the Aegean Sea to mainland Greece was resisted by local communities, while a modernization effort within universities was met by hostility among the youth organizations of parties of the Left.
Smooth transition despite extreme polarization
In the period under review, despite a very long economic crisis (2010 – 2018), the Greek economy showed signs of recovery. Moreover, despite extreme polarization in the party system between the New Democracy and Syriza parties, the government changed hands in a very smooth manner. In short, the Greek democracy showed a remarkable stability.
Although political stability is a given, high unemployment rates and extensive relative poverty remain serious challenges. The Greek economy is still rather frail. One factor that may prevent irresponsible economic policymaking, however, is the fact that the country is still subject to post-bailout surveillance linked to balanced budgets and further reforms (as are Portugal and Cyprus after their bailouts).