Greek Prime Minister Ekes Out Electoral Victory

Prime Minister Costas Simitis, who steered Greece from a financial morass to the threshold of Europe’s currency union, won reelection Sunday, narrowly surviving voter angst over his austere management and a stock market slump that hurt thousands of small investors in the final weeks of the race.

The 64-year-old incumbent defeated his younger rival, Costas Karamanlis, in Greece’s closest parliamentary election since the end of military rule a quarter of a century ago. With nearly all of Sunday’s votes counted, the ruling Panhellenic Socialist Movement held a 43.7% share against 43.1% for Karamanlis’ conservative New Democracy Party.

Communists and another small leftist party split the remaining votes but had no power to tip the balance. Greek law all but guarantees control of the 300-seat Parliament to the party finishing first, whether or not it wins more than half the vote.

The Socialists, who have ruled Greece for 13 of the last 19 years, appeared to be winning by less than 60,000 votes out of nearly 9 million cast. They are likely to have 156 Parliament seats as opposed to New Democracy’s 127.

“The difficult electoral battle has given us a significant political victory, much bigger than the numbers show,” a jubilant Simitis told reporters early today after winning a second four-year term.

In a backhanded concession, 43-year-old challenger Karamanlis acknowledged the Socialists’ first-place finish but argued that their mandate was not big enough to enable them to govern without consensus.

His 2:30 a.m. appearance today capped a night of seesaw emotions that began with exit polls projecting a slim opposition victory. Tens of thousands of New Democracy activists took to the streets of Athens, dancing, shooting flares and honking horns, only to be subdued by Socialist celebrations as the returns trickled in.

In the northern city of Thessaloniki, rowdy bands from the rival parties lobbed firecrackers at each other.

Both leading candidates supported Greece’s bid to join the 11-member European Monetary Union. But Karamanlis fought a vigorous battle for the votes of pensioners, farmers, jobless youth and others who have felt left out of Greece’s remarkable economic turnaround.

The stolid, pragmatic Simitis capitalized on his image as a can-do statesman. Many voters leaving the polls Sunday said he was more qualified than his inexperienced rival to lead Greece into the union, which uses the euro.

“Simitis has shown that he knows what he is doing and is good at it,” asserted Gerasimos Constandatos, 46, a habitual conservative voter who said he changed his mind on the way to cast his ballot here in the capital at a school near the Parthenon.

“I know it’s fashionable to choose national leaders in their 40s, as Americans did with Clinton, but Karamanlis just doesn’t have the experience,” added Constandatos, a commercial artist. “His image-makers made him look too theatrical. In the year 2000, we don’t want theater. We have an obligation to start acting more European and less Mediterranean, less emotional.”

Indeed, Simitis put a damper on the flamboyant, free-spending populism and anti-American venom typical of his late Socialist predecessor, Andreas Papandreou. Simitis has accommodated the United States, worked to improve relations with archrival Turkey and, like other European Socialists, embraced the free market.

Karamanlis is a nephew of the late Constantine Karamanlis, a respected, long-serving president and prime minister. A member of Parliament for 11 years, the young Karamanlis rose to lead his party in 1997 and was making his first run for national office.

While the more effusive challenger used slick TV spots that capitalized on his youth and his attractive wife, the lawyer-turned-prime-minister defended his own reputation as an aloof technocrat, commenting at one point: “Politics is not about kissing and hugging everyone. I don’t want to be a hypocrite.”

Simitis’ reelection, financial analysts say, will mean smoother negotiation of Greece’s terms for acceptance by the monetary union at a European Union summit in June. The euro would replace the drachma as Greece’s currency in January.

When its richer neighbors formed the currency union at the end of 1998, Greece was the only EU country that flunked the economic and budgetary tests for joining.

But by that time, Simitis had put Greece on a rigid program aimed at putting it in a position to pass those tests this year.

He devalued the drachma, privatized indebted state companies and brought down inflation from double digits in the mid-1990s to a current annual rate of just 2%. Computers have made tax collection more efficient, and this year’s budget set as a target an EU-respectable deficit of 1.2% of gross domestic product. The economy is growing by more than 3% for the fourth straight year.

When Greece declared in February that it had met the currency union’s standards, Simitis’ reelection chances looked good. Ahead by 2 to 3 points in the polls, he called elections six months ahead of schedule.

But Karamanlis’ party campaigned strongly against the government’s failure to stem violent crime, reverse falling standards in public schools and hospitals, make a serious dent in an 11% unemployment rate or improve the lot of farmers, many of whom have lost government subsidies.

In one televised spot for New Democracy, a group of farmers sat in a cafe discussing whose home had been broken into the night before, while Simitis droned on TV in the background. Angrily, someone switched off the set.

Preelection polls narrowed to a dead heat after the Athens Stock Exchange, which had attracted more than 1 million small investors in the drive toward the euro, took a mysterious tumble March 9, the day Greece formally applied for the currency union. Many stocks lost up to 10% of their value that day.

It was a dramatic turn that nearly cost Simitis the election.

The Athens exchange had been one of the world’s hottest since 1998. Betting that Greece would qualify for the euro, foreign investors moved in that year, foreseeing steadily rising values for Greek companies. Ordinary Greeks joined the frenzy last summer, with some taking out loans to pay for their investments and boosting many stocks far beyond their real value.

By September, as foreign capital was taking out its profits, the exchange peaked at 6,331 and began a steady slide. The government, which had initially touted the stock boom as a healthy result of its policies, belatedly warned investors that the market was risky.

The March 9 nose dive, which took the exchange down to 4,864, appeared to dash all hope for a preelection recovery. Angry investors stormed the exchange a few days later--they were beaten back by police--and started demanding answers from Socialist candidates. Each major party, without offering evidence, accused the other of manipulating the market.

“A man selling oranges at a street market came up to me yelling, showing me shares he had bought for 100 million drachmas [about $320,000] and saying they were now worth 65 million [about $210,000],” said Eleni Kourkoula, an actress running for Parliament as a Socialist.

“Something that could have been a strong weapon for Simitis suddenly became a negative,” said George Linatsos, director of research and institutional sales at Artion Securities in Athens. “The number of investors who lost all their savings was limited, but the timing couldn’t have been worse for the government. It changed the momentum of the campaign.”

Forced on the defensive, the prime minister began matching some of his challenger’s populist promises--including a raise in the minimum monthly pension to $430--that he had previously dismissed as irresponsible giveaways.

As the campaign drew to a close, Simitis attacked his foe as “ignorant and inexperienced,” while Karamanlis blasted “the arrogance and autocratic outlook of an establishment regime.” The two parties spent more than $2 million to ensure a big turnout by moving supporters by air and rail from Athens and other cities over the weekend to hometowns where they were registered to vote.