Bloomberg News

Samaras Last Best Greek Hope With Compliance Not Defiance

January 29, 2013

Greek Prime Minister Antonis Samaras

Greek Prime Minister Antonis Samaras. Photographer: Jock Fistick/Bloomberg

At his first cabinet meeting after two inconclusive elections and six weeks of turmoil had pushed Greece to the brink of exiting the euro, Prime Minister Antonis Samaras said he’d had enough.

In a seven-minute speech, he warned his ministers to deliver while reducing their pay by 30 percent. “I’m not interested in good intentions,” Samaras said at the June 21 meeting, televised on state-run NET TV. “I want results.”

The 61-year-old premier has wasted little time since then haranguing European leaders to stop fanning speculation Greece’s place in the euro was less than secure. He has shepherded months of talks between his coalition partners and his troika of creditors over new austerity measures, and clinched the release last month of 34 billion euros ($45.7 billion) of bailout funds that were frozen since he came to power.

He has silenced, at least temporarily, a parade of economists, investors and politicians who predicted Greece’s departure from the euro. The region’s finance ministers spent just 10 minutes on Jan. 22 before signing off on another aid instalment, the latest indication Samaras is the Greek they are banking on to succeed in helping keep their currency intact.

The Athens Stock Exchange General Index more than doubled since June 5, outperforming all equity markets in western Europe. Greece’s 10-year bond yields are about 10 percent from 30.55 percent at the beginning of June.

Greek Hope

“He is possibly the last best hope for anyone who believes that Greece’s best interests lie in remaining in the euro zone,” said Kevin Featherstone, professor of European politics at the London School of Economics. “If Samaras were somehow to fall, it’s not at all clear who could possibly succeed him.”

At the World Economic Forum at Davos last week, Greece slipped down the agenda for the first time in three years, even though its economy is in what Samaras has called a “Great Depression,” with a sixth year of recession and one in two youths now jobless. It may have helped that he didn’t attend.

It wasn’t always this way. Predecessor George Papandreou, 60, who revealed Greece’s misstated deficit figures when he came to power in October 2009, was feted as the man who would change Greece. His visits to Davos in 2010 and 2011 helped keep the country as front-page news.

Papandreou, a contemporary of Samaras at Amherst College in the early 1970s, promised a sweeping overhaul of the economy, including cuts to pensions and wages for state workers, in return for euro area and International Monetary Fund money to prevent the first financial demise of a euro area country.

Political Collapse

Samaras opposed Papandreou’s position. He rejected Greece’s first bailout in 2010 and held up loan payments in November 2011 by refusing to give a written endorsement to budget measures after Papandreou’s government collapsed.

He then insisted on sending Greeks to the ballot box last May rather than continue with the interim leadership of Lucas Papademos, a former European Central Bank vice president, in a move that misread the public’s support for him. His New Democracy party failed to win enough votes in the May 6 election to form a government, resulting in another national ballot six weeks later.

“The insistence on elections was to bring about one of the biggest collapses of any party system in western Europe since 1945,” Featherstone said. “This is playing with fire to a very considerable degree. There is a sense that he makes short-term political calculations. Critics see him as an opportunist.”

The May election led to the emergence of Syriza party leader Alexis Tsipras, who was perceived as posing a further threat to political stability in Greece. Tsipras, 38, heads an anti-austerity party that rode a wave of public anger to second place in the vote.

Drachma Specter

During the campaign, Tsipras vowed to cancel terms of the Greek bailout, in a challenge to German Chancellor Angela Merkel to call his bluff and expel Greece. Financial markets gyrated with the benchmark Athens stock index falling to the lowest level in more than two decades on June 5.

Samaras, campaigning on the choice of “euro or drachma,” the old Greek currency, won the June election and formed a government with Pasok, Papandreou’s party, and the smaller Democratic Left. He also promised EU leaders that he will honor terms of the current 130 billion-euro rescue package.

Seven months and 13.5 billion euros of austerity measures later, Samaras has been rewarded with another two years until 2016 to meet budget-cutting targets.

While Papandreou had increasingly faced isolation, Merkel braved demonstrations to visit the Greek capital in October, repaying Samaras’s commitment to playing by the rules Germany had set. For his part, Samaras has gone to Berlin twice. In his first trip, in August, Merkel admonished lawmakers from her coalition who said Greece should quit the euro, telling them to “weigh their words very carefully.”

Merkel Messages

“I want Greece to stay in the euro zone and that’s what I’m working for,” Merkel said. She said she is “deeply convinced” Samaras will make every effort.

That contrasts with a threat she delivered to Papandreou in November 2011 after he returned from a meeting in Brussels with a new bailout package and debt writedown only to declare his intention to hold a referendum on austerity measures tied to it. The plan was subsequently rescinded and Papandreou fell.

The change toward Samaras shows “how close things were to disaster,” said Stathis Kalyvas, a professor of political science at Yale University. “This strikes me as a classic case of someone stepping up to the occasion. Because expectations were so low about Samaras, most foreign observers have been pleasantly surprised.”

Less Public

Samaras, a champion tennis player in his youth, comes from a political family. He is the grandson of a parliamentarian and the nephew of another, though his father was a cardiologist.

Since taking office, his public appearances have been less frequent than those of Papandreou, whose father was prime minister in the 1980s and again in the mid-1990s.

Samaras held just three cabinet meetings, preferring to receive briefings from ministers far from television cameras, a departure from Papandreou’s style of holding open discussions, inspired by his annual symposiums on foreign policy and environmental issues held on Greek islands. Samaras’s office said he wasn’t available to comment for this story.

“He doesn’t want to leave things hanging,” says Dino Arcoumanis, a school friend who is deputy vice chancellor at City University in London. “He doesn’t want to finish meetings without some decisions. Greece now needs that.”

Coalition Glue

The greatest challenge will be to hold together a coalition that in its short lifespan has already lasted longer than any attempted since the return of democracy in 1974.

He’s transcended Greek political traditions by forging a close relationship with his finance minister, Yannis Stournaras, who comes from the opposite side of the spectrum. Stournaras was an adviser to Costas Simitis, the Pasok prime minister as Greece readied for euro membership in the late 1990s.

At the same time, the government has been criticized by human rights groups for police treatment of illegal immigrants. He sent officers in to break up a nine-month strike at a steelmaker in July. This month, he used an emergency decree that forced public transportation workers to end a nine-day walkout.

The potential clash between European demands for more budget cuts and Samaras’s ability to deliver may keep alive the threat of Greece’s exit from the euro.

The economy has contracted by more than 20 percent since 2008 and the IMF says it won’t stop shrinking until next year, with reforms remaining “a constant challenge.” They include an overhaul of the tax system and selling state assets amid waning social support and “political fragilities.”

Lingering Risk

“The efforts of Greek and European leaders have helped, but have not taken this risk off the table,” the IMF said in a report released on Jan. 18. “Indeed, until Greece completes its external adjustment and restores its competitiveness, it cannot be fully taken off the table.”

While the conviction that Greece must remain in the euro “at all costs” has kept Samaras’s coalition united so far, any wavering could reignite the debate over a Greek exit by year end following elections in Germany.

Samaras has focused attention on Germany in a bid to win the support of a public that’s paying the most for Greece’s bailouts. A poll last week by ZDF showed Merkel’s Christian Democratic Union-led bloc had the support of 41 percent of respondents, compared with 29 percent for the opposition Social Democratic Party.

German History

One of the first to evoke the danger of Greece’s austerity leading to a repeat of the German instability that ushered in the Nazi era, Samaras repeated the comparison for his German audience in an interview with newspaper Handelsblatt on Oct. 5.

The Greek prime minister has given at least two interviews to Bild, a newspaper that advised Papandreou in an open letter in March 2010 for Greeks to rise earlier and work harder to overcome the crisis.

“One of Samaras’s skills is his ability to concentrate on the present rather than dwell on the past,” said Arcoumanis, the school friend, whom Samaras appointed ambassador-at-large in September. “If you are talking about 20 years ago, clearly he is a very different person.”

Armed with a master’s degree in business administration from Harvard University, Samaras entered parliament for New Democracy in 1977, at the age of 26. Before he was 40, he served as both foreign minister and finance minister.

Wilderness Years

While as foreign minister in 1992 he signed the EU treaty that paved the way for the euro, he’s remembered more for his dispute with his prime minister over the name of the former Yugoslav Republic of Macedonia.

He abandoned New Democracy in 1993, and formed his own party, Political Spring, which drew enough defectors to bring about the collapse of the then government.

The breakaway party floundered after a few elections, casting Samaras into relative obscurity. He re-joined New Democracy in 2004 and took over as opposition leader when the party was ousted by Papandreou and Pasok in 2009.

“He’s been led by circumstances and forced by circumstances not of his own making to represent the last best hope before further chaos,” said Featherstone at the London School of Economics. “He’s the best by default.”

To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net


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