A Greek Drama at the Polls

By Christopher Byron

Elections amid uncertain growth and 20%-plus inflation

Is the tenth and most recent member of the European Community about to become its first dropout? That is one of many urgent economic questions facing 6.6 million Greeks this summer as their country prepares for autumn parliamentary elections.

Burdened with the highest inflation rate in the European Community and a slumping currency, the four-year-old center-rightist government of Prime Minister George Rallis is coming under a withering campaign assault from left-wing Socialist Opposition Leader Andreas Papandreou. The onetime University of California economics professor, now head of Greece's far-left Pan-Hellenic Socialist Movement, or PASOK, blames his country's misfortunes on everything from membership in the European Community to its return last year to full military participation in the North Atlantic Treaty Organization.

Though PASOK holds only 93 of Parliament's 300 seats, vs. 172 for Rallis' ruling New Democracy Party, the Papandreou organization has rapidly gained strength since its founding in 1974, after the collapse of seven years of military rule. The outcome of the election is now considered a tossup.

PASOK has been able to cash in on Greece's social and economic troubles. The country's current rulers look weak, in part because extremist violence has climbed sharply in recent months, with a heretofore unheard-of wave of politically inspired department-store firebombings and arsonist attacks.

Meanwhile, the country's economy is stagnating. Seven years of skyrocketing oil prices have sapped Greece of its economic vitality, cut growth by more than half and sent inflation soaring. The Rallis government has sought to boost growth by integrating Greece as quickly as possible into the European Community. Over the long term, Greece stands to benefit handsomely from Community membership. It would receive upwards of $1.8 billion in regional economic and industrial development aid by 1986.

But in the short run, European Community membership has pushed up inflation by forcing Greece to raise price supports for the country's farmers. Just after Greece joined the Community in January, food prices spurted upward briefly, reaching an annual inflation rate of 30%.

The overall inflation rate, which reached 26.2% last year, has lately begun to ease off slightly, and now stands at about 23%. John Paleocrassas, Rallis' London-educated Minister of Coordination, speaks confidently of a rate of no more than 19% to 20% by year's end. But John S. Costopoulos, managing director of the Credit Bank, is less sanguine. Says he: "Anything under 22% would make me quite happy."

The improvement in prices, though, is likely to result from a looming economic slowdown. Growth was running at 5% annually from 1974 to 1978, but last year it dropped to 1.6%. This year economic" activity is officially projected to range between 2% and 2.5%, but some economists think the estimate might turn out to be on the high side. One reason is the precipitous drop in investment, both domestic and from abroad, as businessmen mark time until they see whether the left wins in the fall. Admits Paleocrassas: "People are hedging, waiting for the outcome of the election."

Slower growth could begin pushing up unemployment, which at 2.6% of the labor force is one of the few really bright spots in the Greek economy. Rising unemployment would of course limit the ability of either Papandreou or Rallis to pursue a sustained anti-inflationary policy, and that would simply curb economic activity even more.

Though PASOK calls for the state takeover of such key Greek business sectors as steelmaking, petrochemical fertilizers and the cement industry, Papandreou has refused to spell out precisely how this would occur or how businessmen would be compensated. As PASOK's election prospects have improved, Papandreou's position has moderated somewhat. He no longer urges outright withdrawal from NATO and the European Community or a shutdown of U.S. bases. Instead, he is calling for a referendum on Community membership and annual negotiations with the U.S. on the status of bases. Although a Socialist government in a country has never before been an invitation to foreign investment, Papandreou boldly says, "If we become the government, there will be a real wave of new investment in Greece."

Rallis aides charge that Papandreou is simply trying to hide his true Marxist views until after election day. But Papandreou retorts Delphically: "A party that is close to attaining power, or has assumed it, has several intermediate objectives, which are determined not only by its ultimate goals but also by the strength of the prevailing winds."

Whatever the outcome of the election, the future course of Greece's economy is not encouraging. If Rallis and his New Democracy party are returned to power, the government will have to take unpopular measures to reduce inflation. Moreover, many sectors of the economy suffer from long years of neglect and unrealistic pricing. The phone service, for example, is primitive because politically popular low prices (1.6-c- for a local call) have made it impossible to raise money to modernize telecommunications facilities. But if Papandreou and PASOK become the country's new rulers and start a massive program of nationalizations, Greece's economy will be headed for turmoil and uncertainty.

--By Christopher Byron.

Reported by Walter Galling/Athens

With reporting by Walter Galling

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