PASOK’s Implosion and Greek Court Threaten Euro Status Quo

ekathimerini.com | PASOK in turmoil as Venizelos tries to quell rebellion.

Risk Off: Greek Court Warns Troika-Demanded Austerity May Be Unconstitutional | ZeroHedge.

It looks like it’s Greece’s turn to be the center of the euro crisis this week with much political infighting and an intriguing statement by its highest constitutional court. I still believe that Samaras will manage to ram through whatever reforms the troika demands in order to get his mitts on the next tranche of bailout money, but the vote will not be smooth.

PASOK up until a few months ago was one of the two dominant parties in Greek politics with Samaras’ New Democracy. It is now polling in sixth place behind virtually everybody else including the neo-fascist Golden Dawn.

In order to remain relevant PASOK chose to join the governing coalition, which is beginning to splinter. The socialists have been forced to support measures that their ideology and history tells us are anathema to its supporters.

PASOK voting for a higher retirement age and less worker protections is akin to the Democratic party supporting a repeal of Medicare and more restrictive abortion laws. As such, its base has abandoned it in droves, and its deputies are beginning to think of their own jobs.

The political calculus for the 33 PASOK deputies is simple. If they oppose further austerity, they may be able to retain their constituent’s support. On the other hand, they may be blamed for bringing the government down and the resultant chaos.

Supporting the austerity measures will allow the ruling coalition to continue indefinitely, and perhaps in a year or two voters will have forgotten this one vote.

Those are the choices facing the 33 deputies as they seek to retain their diminishing power.

With the loss of the Democratic Left’s votes on the labor reform package, only 160 votes remain between New Democracy and PASOK to pass the legislation. If eleven voters from the coalition defect, the vote will fail and the release of the troika loans will be thrown into question.

No one knows the likelihood of this scenario playing out, but based on the eurocrisis cycle I believe that it will not. The cycle is currently entering the brinkmanship phase, which is necessary for Greece to obtain some concessions while the German-led troika gets to appear tough. This posturing allows both sides to make the final result more politically palatable to their various coalition members.

Like I have been writing since August, look for Greece and the troika to arrive at a compromise just in time to avert disaster.

The Greek constitutional court is more insulated from current popular political opinions, but not entirely. The German supreme constitutional courtĀ  allowed Germany to participate in the ESM because it did not want the blame for causing a market panic.

The Greek court finds itself in a similar position and will do what is necessary to maintain the current status quo. Whatever compromise Greece and the troika agree to will pass Greek constitutional muster in order to keep the train on the rails.

I leave you with one caveat. While all of the players have an interest in maintaining the status quo, brinkmanship is a dangerous game. World War I was directly caused by each side believing it was calling the other side’s bluff.

In the present situation, the current equilibrium should be maintained, but the odds of this happening have just decreased.

 

 

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