Georgios Karyotis: New PM’s credentials mean he can offer internal stability and external credibility

IN THE past two weeks, Greece has found itself at the epicentre of global attention, in a nail-biting display of high-stakes brinkmanship. George Papandreou’s declaration that the Greek people should decide in a referendum whether to accept the latest European deal to cut Greece’s massive debts caught everyone by surprise.

It sent shockwaves across global markets and even raised doubts about the future of the eurozone, let alone Greece’s place within it.

What led a moderate, pro-European politician to such a bold and risky move? Three possible explanations can be identified. Papandreou was optimistic that an anticipated “Yes” vote would enhance the political and social sustainability of the harsh but essential measures, upon which the bailout agreement is conditional.

Also, Papandreou attempted to protect his political legitimacy and his party’s electoral prospects by forcing the main opposition party, New Democracy and its leader Antonis Samaras, to take a clearer stance on the austerity package, which it had been avoiding in order to capitalise on people’s discontent.

Further, it is plausible that the referendum was meant to signal to European partners that there were limits to what the Greek government would be able – or willing – to agree to, and thus enhance its negotiating power.

Whatever the motivations, his decision backfired in a spectacular way. European leaders had no intention of leaving the hard-fought deal in the balance for weeks, thus perpetuating uncertainty in the eurozone, at a time when Italy is coming under immense pressures over its finances.

Papandreou’s own PASOK party members were quick to distance themselves from their leader, threatening to overturn the government in the confidence vote last Friday. Forced to abandon the referendum, Papandreou narrowly survived the vote, but on the condition he made way for a coalition government.

The announcement of a national unity government marks a new chapter in Greek political history. The appointment of Lucas Papademos epitomises the characteristics that the new prime minister should have at this crucial juncture: local knowledge and international standing. His experience as governor of the Bank of Greece from 1994 to 2002, during which time Greece entered the eurozone, means he will need no introduction to the challenges ahead. His European credentials, having served as vice-president of the European Central Bank, are testament to his standing and ability to offer internal stability, above party politics, and external credibility.

PASOK and New Democracy had been locked in talks for five days. Papademos had emerged as front-runner early on and was widely considered the ideal candidate but this made him a potential rival for those with aspirations in future elections.

Greece is therefore emerging out of the crisis bruised but not beaten. The appointment of the coalition government has the potential to even lead to a major realignment of the political system in Greece.

• Dr Georgios Karyotis is a lecturer in the School of Government and Public Policy at the University of Strathclyde and Secretary of the Greek Politics Specialist Group.