Aug 29-30th 2015, Appointment of Greece’s caretaker government is a significant step towards return to normality

Athens, Aug 29-30th

·         Greece’s caretaker government led by top judge Thanou was sworn by President Pavlopoulos. A cabinet meeting took place at the Parliament. The new prime minister Thanou notified the Speaker of Commons Constantoupoulou as regards the proclamation of elections and the dissolution of Parliament.

·         As it was predicted, the profile of new cabinet  a) is pro European and b) it consists of individuals of more relevant or even better professional profile compared to previous SYRIZA – Independent Greeks’ government.

o    Two more polls were published showing a) the gap between SYRIZA and New Democracy (centre right) has been narrowed down significantly b) the new Parliament will consist of 8 political parties. It appears that Independent Greeks won’t succeed to surpass the threshold of 3% in order to enter the Parliament.

·         More specifically:

o    Metron analysis’ poll showed the following results: SYRIZA (left) 29%, New Democracy (centre right) 27.8%, Golden Dawn (neo nazis) 8.3%, Potami (centre) 6.7%, KKE (communists) 5.9%, PASOK (centre left) 5.4%, Centrist Union (centre) 4.9%, LAE (left eurosceptics former SYRIZA) 4.1%. In the same poll, 77% judge SYRIZA’s governance negatively.

o    University of Macedonia’s poll showed:  SYRIZA (left) 25%, New Democracy (centre right) 22%, Golden Dawn (neo nazis) 5.5%, Potami (centre) 6.0%, KKE (communists) 6.0%, PASOK (centre left) 4.5%, Centrist Union (centre) 4.5%, LAE (left eurosceptics former SYRIZA) 5.0%. The same poll was showing 18% gap between SYRIZA and ND, three month ago.

·         Unconfirmed reports mention that this weekend, during SYRIZA’s country-wide conference, there will be a significant number of resignations, mainly from its Youth Organisation. The number of SYRIZA’s middle and low level executives and activists who choose to exit the party and either go home or join political party LAE, intensifies.

·         Eurogroup's Jeroen Dijsselbloem mentioned in Reuters that the caretaker government should continue Greece's preparations to meet country's obligations to creditors.

·         Greece’s pensioners saw their pensions reduced due to the measures agreed by government SYRIZA-Independent Greeks and voted by Parliament. It is still unknown what will be the impact of it to Tsipras’s popularity.

·         Although Council of State decided against SYRIZA government’s decision to cease gold mining operations of ‘Hellas Gold’, company’s operations have not been restarted yet, because the decision has not been implemented yet. 2500 miners continue for a fifth day their demonstrations.

Risk assessment: Tsipras remains the main political figure in Greece’s political system so far. However, it seems that he came on power, a) sooner than he should have done b) without a clarification of his European strategy and c)  based on a populistic agenda. His u turn as regards negotiation with creditors increase probability that his popularity will go south.

SYRIZA was a grass root movement which grew during anti memorandum demonstrations and still has neither clear ideological characteristics nor clear hierarchy. Although Tsipras controls the majority of SYRIZA, he is heading to elections, weaker and without clear and/or strong communication strategy. It would be difficult to defend his u-turn amid significant deterioration of economy.

Greece new government’s first day, evolved smoothly and without any incident. In general, "suits and ties return to Greece’s leadership", and this created a very different picture compared to previous government’s appearance. 

Despite what is being said, this government will need to a) continue Greece’s preparations as regards obligations related to 3^rd MoU b) restore confidence to economy in order to handle banks’ recapitalisation and improve performance on tax revenues front and c) handle refugees’ crisis.

I remain on my previous estimate that this government will probably stay after elections because Greece is heading on a hung parliament and currently SYRIZA rejects any plan to form coalition government with New Democracy, Potami and PASOK. 

Needless to say that caretaker government is the result of a compromise between SYRIZA and all pro-European political parties (ND, Potami & PASOK). Let’s keep this in mind.

I see  a gradual reduction of overall Greece’s political risk; although there are significant risks ahead, Greece gradually returns to normality and this will ‘contaminate’ economy soon.