Greek socialists ride wave of discontent

By Kerin Hope in Athens

Athenians sipping cappuccino freddo applaud as Athina Dretta, a parliamentary candidate with the Panhellenic Socialist Movement, arrives on a motorcycle to make a 15-minute speech at the “Face Place” café.

But beyond the brightly lit café strip, empty shops displaying “for rent” signs and stalled construction projects give the Neo Iraklio suburb a depressed look. “Greece was booming until last year. Now we face recession and anxiety about the future. Will our kids be able to find jobs?” asks Mrs Dretta, a dentist and mother of two.

With a 5-7 percentage point lead over the governing New Democracy party, the socialists are poised to win Sunday’s general election and buck a European trend of backing centre-right political parties. The socialists under George Papandreou, a former foreign minister, are riding a wave of popular discontent over ND’s economic policies. Greece faces a long period of recession, with the economy set to shrink by about 1 per cent this year and 0.5 per cent in 2010.

While Kostas Karamanlis, prime minister, proposes two years of tight fiscal policies, the socialists plan to launch a €2.5bn ($3.6bn, £2.3bn) stimulus package for small and medium businesses and raise revenues through tax rises on high incomes. “We can’t have a recovery if we don’t take steps to get the economy moving again,” Mr Papandreou tells his supporters.

Until this year, Mr Papandreou struggled to persuade his party to set aside its militant leftwing tradition and adopt a social democrat platform of “soft development”.

“This is a time for institutional change,” Mr Papandreou said last week as he outlined plans for overhauling the state healthcare and pension systems and environmentally sound “green growth”.

New Democracy has lost credibility over a series of corruption scandals, the government’s failure to curb last December’s riots, and a disastrous forest fire last August that highlighted inefficiencies in public administration.

“As long as the economy was OK, you could overlook other things. Disappointingly, Greece faces not just a recession but several years of stagnation,” says Carolos Anastasiades, a businessman and ND supporter.

Public finances are in disarray, with the budget deficit projected to reach 6-8 per cent of gross domestic product this year. A 50 per cent increase in borrowing to fund the public debt – at 105 per cent of GDP, the eurozone’s second-highest – undermines the conservatives’ claim that Greece can weather the crisis without lasting problems.

Yet despite the socialists’ clear lead, under Greece’s proportional poll system, a last-minute swing to the far left could deprive them of an absolute majority.

Mr Papandreou has declared the socialists open to co-operation with smaller parties, but rules out a coalition or a minority government. If they fail to win outright, he is ready to fight another election next month.

“Every vote can make a difference, we mustn’t lose any. Only a stable government with a strong majority can implement the changes we need,” he says.