Opinion polls for the last year have given the right-of-center opposition New Democracy party (ND) a commanding lead, while Costas Simitis, the reformist prime minister and PASOK leader who steered Greece into the euro zone, has lost ground to Costas Karamanlis, his younger conservative rival.
True, the ND party came out ahead of PASOK, winning mayoral races in Athens and Thessaloniki, Greece's two biggest cities. Furthermore, the conservatives exploited farmers' dissatisfaction with declining European Union subsidies to win thirty out of fifty-two provincial governor's posts. But PASOK held on to the high-profile post of Attica governor--won comfortably by Fofi Gennimata, a rising star and one of only a handful of women in the party's upper echelons. Overall, barely two percentage points separated the two big parties.
While ND is still the favorite to win the next general election--not due until spring 2004 but likely to be held earlier--PASOK has shown remarkable powers of resilience. A feel-good factor is certainly at work, with Greece's economy projected to expand this year by 3.8 percent, more than twice the EU average, and by 4.1 percent in 2003.
Growth is being driven by high levels of public and private investment, backed by a five-year, $24.6-billion package of EU structural aid. A massive program of infrastructure improvements is aimed at giving the Greek capital world-class sports facilities and a modern transportation system in time for the 2004 Olympic Games. While unemployment is the second highest in the euro zone, this year it has declined to single digits (just less than 10 percent) for the first time since the mid-1990s.
PASOK has expanded job creation programs targeting women and young people and has launched tax cuts for lower income workers. But they face criticism for postponing urgently needed pension system reforms and for failing to cut corporation taxes--among the highest in the euro zone at 35 percent--to boost inward investment. Foreign direct investment, averaging only around $1 billion yearly, is much lower than in the Central European countries that will join the EU in 2004.
"When the EU funds start to decline after 2006, Greece will need a sharp increase in foreign investment to maintain reasonable rates of growth," says George Alogoskoufis, ND's spokesman on the economy.
The Simitis government has earned praise from the US for arresting eighteen alleged members of the November 17 (N17) terrorist organization over the summer. Since its emergence in 1975, the left-wing group had claimed responsibility for more than twenty assassinations, including US diplomats and servicemen and, most recently, Stephen Saunders the UK defense attach in Athens, as well as dozens of bomb and rocket attacks. The arrests came after two years of close cooperation between Greek police and Scotland Yard over the Saunders killing. Trials are due to start early next year and are likely to last for months.
The apparent dismantling of N17, together with plans to work closely with the US on security for the Athens Olympics, has brought a significant improvement in relations with Washington. In response to concerns that other members of the group were still at large, Simitis said: "We will deal thoroughly with the terrorism problem. There may be some pieces of N17 left, but we intend to expose them."
This month EU leaders are due to approve the accession of Cyprus--even if it is still divided into separate Greek and Turkish Cypriot sectors--at their Copenhagen summit along with another nine enlargement candidates. Accession for the island will mark a milestone in Greek