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NEW NEW DEMOCRACY

Out with the new, in with the old: Greeks hand power back to the conservatives

REUTERS/Alkis Konstantinidis
We’re back.
  • Eshe Nelson
By Eshe Nelson

Economics & Markets Reporter

After four and a half years, Greeks returned power to the New Democracy party in national elections on Sunday (July 7). The center-right party lost control of parliament in 2015 to Syriza, a left-wing populist party led by Alexis Tspiras.

Since the global financial crisis, which was followed by a European sovereign debt crisis, several parties have tried their hand at stabilizing the Greek economy. This will be the third leadership stint by New Democracy in the past 15 years. The party is inheriting an economy that is a fifth smaller than it was a decade ago.

Yesterday, New Democracy won 40% of the vote and, today, its leader Kyriakos Mitsotakis was sworn in as Greece’s new prime minister. The party has a comfortable majority in the 300-member parliament, helped by election rules that give the largest party 50 extra seats. Mitsotakis has vowed to cut corporate and income taxes as well as encourage business investment, reform the structure of government, and revive stalled privatization and development projects.

“Reconciling Greece’s fiscal commitments with the creditors and his ambitious program of tax cuts will require some delicate negotiations and will not happen overnight,” said Wolfango Piccoli, co-president of Teneo Intelligence. “Mitsotakis will have to deliver first in terms of reforms. This is something that he understands well unlike most of his predecessors.”

New Democracy “won the elections because the electorate wanted to move on and was very receptive to the positive messaging coming from Mitsotakis,” Piccoli added.

Former prime minister Tspiras had attempted in 2015 to alleviate Greece’s economic woes by taking on the EU and Greece’s other international creditors. He planned to secure debt relief and end austerity. The standoff ended up pushing Greece to the brink of dropping out of the euro, forcing bank closures and the imposition of capital controls.

Tspiras ignored a referendum rejecting bailout conditions, and signed the country up to a third bailout, worth €86 billion ($96 billion), with all the fiscal restrictions that come with it. Having started off as something of a revolutionary, Tspiras ultimately conceded to the EU. Greece exited its bailout last year, but the economy is still struggling to build growth momentum and the unemployment rate stands at 18%.

Syriza’s support had fallen away—in part because of the deal that changed the name of Greece’s neighbor to North Macedonia—and Tspiras called the snap election for this weekend after being defeated in both local and European Parliament elections in May. Tspiras tried to regain support with more than a billion euros worth of pre-election giveaways (paywall). This will make it hard for the new government to meet a budget surplus target of 3.5% set by the EU this year. Greece’s finances are still under close monitoring by the EU and IMF.

More than a decade of austerity that has produced seven national elections has taken the wind out Greece’s democracy.  Electoral apathy seems to have set in. Voter turnout was just 58%, even though voting is compulsory in Greece. In the 2015 parliamentary elections that swept Syriza to power, turnout was 64%. It dropped to 56% when Tspiras called another election nine months later.

Yesterday’s vote has given power back to a centrist from one of Greece’s political dynasties: Mitsoktakis’s father was prime minister in the early 1990s and his sister has been a cabinet minister and former mayor of Athens. There were shakeups among the smaller parties, with Golden Dawn, a neo-fascist group, failing to win enough votes to make it into parliament, losing all 18 seats it previously held. MeRA25, a new party founded by former Syriza finance minister Yanis Varoufakis, won nine seats.

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