BBC News
watch One-Minute World News
Last Updated: Monday, 24 September 2007, 12:17 GMT 13:17 UK
Greece faces tough reform choices
By Helena Smith
BBC News, Athens

Costas Karamanlis
Costas Karamanlis is continuing a long political dynasty
Greek Prime Minister Costas Karamanlis has injected a new sense of urgency into his country's politics since his re-election on 16 September, aware that he cannot afford to rest on his laurels.

"We cannot lose one day, one minute," the 51-year-old told his new - and unusually youthful - cabinet last week. He had skilfully got his conservative New Democracy party re-elected - a feat not achieved since 1977.

Mr Karamanlis is acutely aware that with a majority of just two in the 300-seat parliament, and the election of minority parties on the left and right, pushing through the painful policies that will bring modernisation is not going to be easy.

If Greece is to keep pace with its much richer eurozone partners, the new government has to radically overhaul the state pension system, reform the country's antiquated education sector and press ahead with privatisation of the national carrier Olympic Airways and other ailing state firms.

It also needs to streamline a public administration whose weaknesses were woefully exposed by the state's handling of fires which left 66 dead and much of the southern Peloponnese in ashes this summer.

Deadlines for change

Nearly 180 years after it proclaimed independence from the Ottoman Empire, the strategically placed nation has come to a crossroads that will take it either down the path of modernisation or regression.

The election produced a crushing defeat for the main opposition Panhellenic Socialist Movement (Pasok) - despite widespread anger over the devastating wildfires. Smaller parties did well.

Greek election results
"We will operate with determination and focus on targets and deadlines which must, absolutely, be met," Mr Karamanlis said.

He then held a succession of meetings, telling each minister he would be monitoring their progress closely and, like a stern schoolmaster, chastising them if they fell short of their grades.

The approach is a departure from Mr Karamanlis' first term in office.

Then, he was so hands-off, rationing his appearances in public and giving his ministers a free rein, that Greeks joked he would go down in history as being the "invisible" prime minister.

Now he knows that time is of the essence if crucial economic and social reforms are finally to be enacted.

"At first sight it does seem that with their reduced representation, and the first-time presence in parliament of the populist far-right Laos party, the conservatives are going to have a much tougher time with any reform agenda," says the prominent political scientist Dimitris Keridis.

"But Karamanlis also wants to leave a legacy. As the nephew of Greece's great statesman, Konstantinos Karamanlis, he has a very keen sense of history and historical destiny and I think that will make him much bolder in grasping the nettle of reform."

Frosty relations

Greece is facing one of its most challenging periods since the return of liberty in 1974 after seven years of military rule.

Lumberjacks work on the burnt ancient Hill of Kronos
Greece needs a big reconstruction effort after the forest fires
Costly, cumbersome and stubbornly resistant to change, Greece's state sector retains one of the largest labour forces in the EU.

Foreign policy will be no less demanding. Mr Karamanlis will have to deal with long-running disputes with Greece's neighbours - tensions with Turkey over Aegean islands and the continuing division of Cyprus, plus use of the name "Macedonia". Greece insists the country on its northern border should not call itself "Macedonia", arguing that the name implies territorial claims.

Greece is no longer a poor country - indeed under the conservatives it has seen its economic record improve to the point that it now has one of the highest growth rates in Europe. Yet EU officials have voiced frustration with the free-market New Democrats' timid embrace of reform.

Widespread corruption and nepotism have also been criticised.

Tellingly, Greece's ranking in the global league table of corrupt nations, assembled by the Berlin-based watchdog Transparency International, fell from 46 to 54 last year, just ahead of Namibia and behind nearly every other EU nation.

Mr Karamanlis knows that this time there will be no grace period.

Pasok turmoil

Greece may be reaping the rewards of globalisation - taking in record earnings in both tourism and shipping - but the gap between rich and poor is growing.

With Greeks deeply divided over the prospect of modernisation - as the increased support for parties that reject reforms outright has so eloquently shown - the conservatives will likely also have to reach some accord with Pasok on the passage of bigger reforms.

George Papandreou, the socialists' 55-year-old leader, also campaigned on a platform of "new change". But with two electoral defeats on his watch, and senior cadres openly challenging his position, it remains uncertain whether the US-born politician will survive a vote for the post in November.

Many think he will not. Oddly, it is the New Democrats who are watching Pasok closest. For many, the prospect of the party replacing its mild-mannered chief with a more quarrelsome figure is as frightening as the spectre of protests on the streets.

Country profile: Greece
18 Sep 07 |  Country profiles
Greek election: Readers' voices
14 Sep 07 |  Have Your Say

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific