Greece: The New Greece

The New Greece

In the aftermath of its failure to gain control of Cyprus by political manipulation there, the Gizikis government, in July, 1974, voluntarily turned over power to a civilian government headed by Karamanlis, who returned from exile. Most exiled politicians (notably Andreas Papandreou) returned to Greece, all political parties (including the Communist party) were allowed to operate freely, and the 1951 constitution was reinstated. In a 1974 referendum, Greek voters rejected reestablishing the monarchy in favor of a presidential parliamentary republic. Karamanlis and the conservative New Democracy (ND) party were reelected and retained their majority in 1977. In 1980, Karamanlis was elected to a five-year term as president, and Giorgios Rallis succeeded him as premier. In 1981, Greece became a member of the European Community (now the European Union).

The Pan-Hellenic Socialist Movement (Pasok), under Papandreou, won majorities in the elections of 1981 and 1984, ending 35 years of pro-Western, conservative rule. Under the Socialist governments of the 1980s, support of the public sector grew, and many state-owned businesses continued to lose money. Pasok failed to retain power in 1989, but three elections were needed before the ND secured a parliamentary majority of one vote in 1990. Constantine Mitsotakis then became premier, and Karamanlis was elected president for a second time. Facing a record deficit and high inflation, the Mitsotakis government instituted a severe austerity program and started large-scale privatization of state-owned industries.

In the 1993 elections, Pasok regained power, with Papandreou as premier, and privatization programs were cut back. A dispute with Yugoslav Macedonia was resolved in 1995 when the new republic agreed to modify its flag and renounce any territorial claims against Greece, but the neighboring nation's use of the name Macedonia continued to objectionable to Greece, which in subsequent years blocked its neighbor's admission into the European Union and NATO. In 2011 the International Court of Justice ruled that Greece's blocking of Macedonia's bid to join NATO was contrary to the 1995 agreement. Karamanlis retired as president in 1995 and was succeeded by Costis Stephanopoulos, who was reelected in 2000.

In Jan., 1996, Papandreou, who was then severely ill, resigned and was replaced by the moderate Socialist Costas Simitis, who continued economic reforms aimed at shrinking Greece's welfare state and preparing the nation to participate in the European Union's single currency (the euro), which was adopted by Greece in 2001. Thoughout the 1980s and 1990s Greece's ongoing disputes with Turkey over Cyprus and the status of the Aegean Sea resisted solution, but relations with Turkey began to improve in 1999 after both nations were separately hit by earthquakes and sent aid to each other.

In 2000, Simitis and Pasok retained power after a narrow victory in the general election. Although the economy generally improved under the Socialists, the unemployment rate remained high and corruption scandales hurt the party. In the 2004 elections ND won a majority in parliament, and Costas Karamanlis, nephew of the former president, became premier. Karolos Papoulias was elected president in 2005, succeeding Costis Stephanopoulos. In Aug., 2007, Greece experienced the worst outbreak of wildfires since perhaps the late 1800s; the fires were particularly devastating in the W Peloponnesus. The perceived slow government response to the fires contributed to ND losses in the Sept., 2007, parliamentary elections, but Karamanlis's government nonetheless narrowly retained power. In Jan., 2008, Karamanlis made an official visit to Turkey, the first by a Greek premier in half a century.

In 2008, several government scandals, the effects of the international economic downturn, and days of rioting in December sparked by the shooting of a teenager greatly diminished public support for the government. In Aug., 2009, raging wildfires outside Athens, though less destructive than those of 2007, led to renewed criticism of government preparedness and planning. When Karamanlis called a snap election for Oct., 2009, Pasok secured a majority in the parliament and George Papandreou, Andreas's son, became premier.

A sizable budget deficit forced the new government to adopted an austerity budget for 2010 amid fears that Greece could default on its significant debt obligations. In Jan., 2010, the European Commission condemned Greece for deliberately misreporting past government financial data, and said that its national debt could be greater than expected; additional austerity measures were subsequently adopted under EU pressure, and later calculations (Nov., 2010) showed the 2009 debt and deficit to be even worse. The austerity measures led to sometimes violent demonstrations as unions called a series of general strikes; protests against government policies continued into 2011. President Papoulias was reelected in Feb., 2010.

In May, 2010, the EU, IMF, and Greece finally agreed on a three-year, €110 billion loan package to aid Greece if needed; German resistance to EU aid had delayed the package and led to uneasiness in the financial markets, which had affected the value of the euro. A year later, however, it was evident that additional aid over a longer time-frame would be needed, as the government's austerity measure had sharpened the recession, which led to higher than anticpated budget deficits and also sent unemployment to record levels. In June, 2011, the government was forced to adopt yet more austerity measures. The following month a new loan EU plan for Greece's debt, involving swapping short-term bonds for long-term ones and amounting to a default, sought for the first to reduce Greece's outstanding debt. It was unclear, however, if the plan would be sufficient to stabilize Greek finances.

In the face of public protests, Premier Papandreaou pressed on with measures including privatization and the reduction of the public sector and agreed to additional austerities. His move to put to a referendum an October rescue package that involved banks taking a 50% loss on Greek debt undermined the government and threatened the bailout deal, but it also led in November to the establishment of an interim government of national unity with former European Central Bank vice president Lucas Papademos as premier.

In Mar., 2012, an agreement on conditions for the new EU bailout, which totaled €130 billion, was finally reached. Additional government spending and wage cuts were adopted as part of the agreement, and holders of Greek debt took losses of up to 74% as part of the deal when the country's privately held debt was reduced by €107 billion. The IMF provided an additional contribution of €28 billion. At the same time, however, the austerity measures contributed to a crippling recession, with unemployment exceeding 20% by the time of the May, 2012, elections and increasing to 27% by end of 2012. The continuing economic contraction led to worsening government finances, necessitating additional austerities later in the year in order to secure subsequent payments from the bailout fund. The economy and austerity measures also led to a series of strikes and public protests that continued into 2013 as unemployment remained at record levels, reaching 28% in Nov., 2013.

The May, 2012, elections yielded a fragmented parliament, as many voters rejected Pasok and ND; the latter won the largest share of the vote, 19%, but Syriza, a new leftist party that rejected the March agreement, placed second with 17%. No party proved able to form a governing coalition. In new elections in June, both ND and Syriza increased their shares of the votes and seats, and ND, who narrowly came in first, formed a coalition government with Pasok and the Democratic Left. ND leader Antonis Samaras became premier.

The sudden closure of Greece's state broadcasting company (pending creation of a smaller company) by the government in June, 2013, as an austerity measure led the Democratic Left to withdraw from the government; additional austerities were subsequently approved. In Mar., 2014, the government secured passage of an economic reform bill whose measures had been agreed to in order to obtain loans to repay government debt. The country officially exited its six-year recession in the second half of 2014, but unemployment remained at near-record levels, and diminished very slowly in subsequent years. After Samaras failed to secure the election of new president in Dec., 2014, parliamentary elections were held in Jan., 2015, and Syriza won a plurality, with 36% of the vote and almost half the seats.

Syriza formed a government with the Independent Greeks, a small, right-wing party, and Alexis Tsipras, Syriza's leader, became premier. In February, Prokopis Pavlopoulos, a ND member nominated by the government, was elected president. The new government's desire to avoid an extension of the stringent bailout program led to difficult, contentious negotiations with the European Commission, European Central Bank, and the IMF, and acrimony with several EU nations, especially Germany.

The lack of a resolution led in June to a banking crisis when depositors withdrew funds, anticipating a possible Greek exit from the eurozone, and by July dwindling government funds led to a temporary Greek default on its IMF debt. Capital controls were imposed (and only partially eased over the next year), and banks temporarily closed. In a referendum in July, Greek voters supported the government in its attempt to ease austerity conditions but, to win aid, Tsipras subsequently proposed greater austerities than voters had rejected. The eurozone nations, led by Germany, demanded even greater budget, tax, pension, and civil service changes as well as privatization and market deregulation; a restructuring of Greek debt, which was supported by the IMF, was not included.

The Greek parliament subsequently approved the necessary measures for the new bailout deal with the EU, which totaled €86 billion, but Tsipras resigned in August due to defections from Syriza. Elections in September returned Tsipras and Syriza to power, again with the support of the Independent Greeks. In 2015 some 850,000 mainly Middle Eastern and North African refugees and migrants seeking to reach N and W Europe entered and crossed Greece, with most arriving by sea from Turkey in the second half of the year. The numbers overwhelmed the country's resources, ultimately forcing it to accept EU aid for policing and housing the influx. In 2016, nations to Greece's north closed their borders to the influx of refugees and migrants, essentially trapping tens of thousands in Greece. At the same time, the EU began deporting to Turkey refugees and migrants who entered Greece from Turkey without following immigration procedures.

Pension and tax changes and other measures were adopted in 2016 in advance of disbursement of additional EU aid to Greece, which occurred in October. Negotiations over the next disbursement of aid extended into 2017 as Greece resisted additional austerities following an economic slowdown in late 2016, but a package that included pension cuts, tax increases, and asset sales was ultimately enacted in May, 2017; additional required measures required for bailout funding were enacted in Jan., 2018. By early 2018 the Greek economy was experiencing steady growth and unemployment had fallen to below 21% (and subsequently continued to decrease).

The capital controls in place since 2015 were further eased in June, and in August the last emergency loan program came to an end, though EU oversight continued. Also in June, 2018, the EU signed a debt relief deal with Greece that gave the country more time to repay its bailout loans, and the Greek government agreed to end the name dispute with Macedonia after its northern neighbor agreed to rename itself the Republic of North Macedonia and make changes to its constitution. In July, 2018, fast-moving wildfires in coastal areas outside Athens killed dozens. The 2019 budget, approved in Dec., 2018, continued to rely on austerity measures to comply with the debt relief deal, and in 2019 the government began using the capital markets for debt financing.

In Jan., 2019, Independent Greeks withdrew from the government after Macedonia complied with the renaming deal, but Tsipras then won a confidence vote. In July, 2019, New Democracy won a plurality of the vote and a parliamentary majority; Syriza placed second. ND leader Kyriakos Mitsotakis succeeded Tsipras as prime minister. The new government ended all capital controls in Sept., 2019. The number of migrants arriving from Turkey increased in 2019 and 2020 (though below the levels of 2015), creating difficulties in the islands near Turkey and on the land border with Turkey.

In Jan., 2020, Katerina Sakellaropoulou was elected president; a judge and nonpartisan candidate, she became the first woman to hold the office. In mid-2020 Greece negotiated maritime agreements with Italy and with Egypt that demarcated Mediterranean Sea boundaries and exclusive economic zones; the deal was in response to a similar Turkish-Libyan agreement in late 2019. Turkish oil-and-gas exploration in disputed sea areas in the second half of 2020 heightened tensions with Greece.

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