The Greek government's closure of the national television and radio network last week marked the end of state-run television in Greece for the first time since 1974, when the country became a functional democracy. It also serves to symbolize that the government finally appears to realize it has produced too many demons, and that the time has come to address them head on.
Greece continues to operate under a client-based political system that nurtures a nepotistic and bloated bureaucracy -- even after five years of crisis and cutbacks. The influence of powerful and partisan trade unions, combined with the manner in which government organizations have been run for the past 30+ years, have contributed greatly to the image of a weak political system unwilling and unable to correct the mistakes of the past.
The closure of the ERT network prompted fierce reaction not only by opposition political parties and the majority of the public sector employees and unions, but also by two of the three parties comprising the tripartite government. As this was a unilateral decision made by the New Democracy (ND) party through Prime Minister Samaras, the fragile governing coalition now faces a potentially serious crisis -- it could fall if the other coalition members choose not to support ND on this issue.
Under the terms of a cost cutting guideline agreed by the government, a total of 180,000 public sector employees must be made redundant by the end of 2015. This includes pending retirees as well as several thousand awaiting decisions from disciplinary committees. It is under this framework that some 2,700 ERT employees were let go at the same time that the government announced it has plans to hire up to 800 employees through a new entity that is to be created in place of ERT.
Although recognizing the unique cultural contribution the ERT has made in the fields of television, cinema, radio and visual arts, as well as some quality educational programs that would not otherwise be available, many Greeks also see the ERT as synonymous with everything that was wrong with the post-1974 Greek political and social reality. It would be unfortunate if the coalition government fell as a result of trying to do the right thing, particularly as Greece remains under tremendous pressure to raise revenues to pay its bills and send a message to Europe, and the world, that it is capable of lifting itself out of the abyss it helped to create.
As agreed by the Troika, the government is attempting to generate more than 2.5 billion euros in revenue through privatizations this year -- part of a larger plan to generate 25 billion euros by 2020. However, the lack of confidence in the Greek economy on the part of foreign investors has greatly complicated the government's ability to raise capital.
As an indication of the difficulty it is having, the government recently requested a postponement of this year's target to sometime in 2014. The failure to complete the DEPA/Gazprom deal that would have contributed some one billion euros to the economy puts the government well behind its target. Moody's characterized the ERT and Gazprom situation as "credit negative" events.
If it is to survive, the government must enhance its ability to reach the agreed targets within the Troika's time frame -- but it is running out of time. If the government has failed to reach the targets by next year -- and doing so will naturally further impact the financial well-being of companies and individuals alike with more austerity measures -- the tripartite government is likely to fall under increasing pressure from the leftist Syriza coalition.
All current opinion polls suggest that the two parties are tied, with a slight advantage to ND. Should ND's efforts fail, Syriza is expected to win the next election. But unless there is a reshuffling of the current composition of political parties, Syriza will find it difficult to identify political allies that could agree on an alternative agenda that stands a chance of being popular -- and succeeding. This would be made all the more difficult given Syriza's desire to void the legislation underlaying ND's actions and instead pursue a different agenda -- without leaving the Eurozone.
A leftist, Syriza-led government would also seriously curtail the privatization process, increase taxation on high-earning individuals and companies, and likely make the difficult investment climate even more challenging through the introduction of business unfriendly regulations. Not exactly what Greece needs.
The European political establishment would clearly like to see the current government succeed, for obvious reasons, but this is becoming increasingly unlikely. Greece's unfortunate recent political history will probably adopt a familiar pattern in the near term, with one failed government giving way to another failed government-in-waiting.
It is unclear what formula would permit the Greek people and its government to help them help themselves. Austerity hasn't worked, but neither has rejection of austerity. Expect more of the same.
Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk advisory firm based in Connecticut, and author of the book "Managing Country Risk". Alexis Giannoulis is a CRS research analyst and a freelance diligence and political risk analyst.
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