Next year will mark 50 years since the creation of the Third Hellenic Republic, which emerged after the fall of the military dictatorship in 1974. The republic has seen some tumultuous times since then — not least the searing economic crisis of 2010 and the years following. Now, with the June 25 re-election of Prime Minister Kyriakos Mitsotakis, there is a tangible hope that better times lie ahead.
Mitsotakis has every reason to be ambitious. His center-right party, New Democracy, can point to an impressive record since returning to power in 2019. The European Commission has ended its enhanced scrutiny of the Greek economy and it is expected that its debt will soon return to investment-grade status for the first time in more than a decade.
Rising optimism not only signals a remarkable turnaround of a country once seen as Europe’s problem child. It is also an indication that Mitsotakis seeks to transform Greece into a competitive European economy and draw a line under a period of political and economic turmoil.
Clientelism has been a persistent problem in Greek governance since the democratic transition or Metapolitefsi (polity change) of 1974. Although the collapse of the military junta promised a return to democracy, patronage networks filled the power vacuum that the regime left behind, at the expense of Greece’s postwar economic development. The economy is nine times bigger than in 1974, but they have been some dramatic ups and downs along the way, with growth often sluggish.
A stable two-party system emerged in the post-junta period under New Democracy and the left-leaning PASOK party, but much of this period was characterized by expansionary fiscal policies, populism, and corruption. Despite entry to the European Economic Community (EEC) in 1981, Greece suffered from a double-digit fiscal deficit and saw the value of its national currency, the drachma, crumble. This left the economy structurally disadvantaged compared to its European counterparts, and an economy suffering from high inflation, high levels of public debt, and minimal foreign investment.
The unfavorable fiscal position meant that the country was particularly vulnerable to the worst effects of the eurozone’s sovereign debt crisis. The Greek government was forced to accept harsh bailout terms from the European Union (EU) and the International Monetary Fund (IMF), which slashed public spending, wages, and pensions. This catapulted the left-wing radical Alexis Tsipras to power and brought Greece close to defaulting on its debts and even crashing out of the Euro (so-called Grexit) altogether.
Mitsotakis thus inherited a difficult situation when he took office in 2019. Tsipras’s populism had shaken the traditional two-party system, and there were questions about its ability to deliver economic prosperity. The possibility of Grexit also raised concern about the country’s place in Europe as a modern, free market economy rooted in core liberal democratic principles.
Personalities have shaped Greek politics ever since Konstantinos Karamanlis (1907-1998), the first prime minister of Greece in the post-1974 transition. Mitsotakis himself hails from a privileged political dynasty. His father also served as prime minister from 1990 to 1993, and he himself was educated at Harvard and Stanford before becoming an investment banker in London. Some questioned whether a member of such a powerful family would be best suited to enact the changes Greece needed, given his ties to the political past.
There are fewer questions about him now. His government received international praise for leading Greece into a strong post-pandemic recovery and he has pursued a pro-Ukrainian policy since Russia’s all-out war began. The majority that New Democracy secured in 2019 meant that much-needed reforms were implemented — for example, a new investment law in 2021 aims to incentivize foreign investment through tax exemptions, grants, and subsidies. This initiative — combined with support from the EU’s Recovery and Resilience Plan — enabled Greece to find new sources of growth in the energy and digital sectors.
The improved performance of the Greek economy as a result has renewed confidence among the electorate in the leadership in Athens. New Democracy increased its share of the vote in this year’s elections (to 40.5%, taking 158 of the 300 parliamentary seats) the first governing party in Greece to do so in four decades. Meanwhile, the threat of left-wing populism has subsided as the vote share of Tsipras’s Syriza party dropped to 18%. The turnout of just 53% was a concern, nonetheless.
Questions remain about New Democracy’s commitment to meaningful political change following the revelation of a wiretapping scandal by the domestic security service against journalists and politicians. The June 14 sinking of a migrant boat off the country’s coasts, and alleged misbehavior by Greek coast guards, also indicate that Mitsotakis continues to pursue a hardline policy with asylum seeking despite EU concerns (such policies are very popular with voters.) The train collision in the region of Thessaly in February, which killed 57 passengers, was a reminder of the work that still needs to be done to tackle infrastructure failings and mismanagement.
Mitsotakis will need to make further progress on structural reform at home if he is to maintain the backing of voters. While he is delivering better minimum wages, improved healthcare, and increased pensions, the economy needs continuing private sector growth and lower subsidies.
For now, at least, the re-elected prime minister should be commended for the professionalism he has brought back to the Greek system of government. At a time when liberal democracy is facing a crisis of confidence in the West, Mitsotakis has shown that mainstream politics can deliver positive results.
Hugo Blewett-Mundy is a commentator and consultant. He holds an MA in Russian and Post-Soviet Politics from the UCL School of Slavonic and East European Studies and writes about current affairs in Central and Eastern Europe.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.