GREECE: GOVERNING ND'S NARROW VICTORY -- WHAT IT

C O N F I D E N T I A L ATHENS 001861 SIPDIS SIPDIS NSC FOR MARIA GERMANO E.O. 12958: DECL: 09/17/2017 TAGS: PGOV PREL GR SUBJECT: GREECE: GOVERNING ND'S NARROW VICTORY -- WHAT IT MEANS FOR U.S. INTERESTS REF: A. ATHENS 1853 ¶B. ATHENS 1834 ¶C. ATHENS 1826 ¶D. ATHENS 1804 ¶E. ATHENS 1785 ¶F. ATHENS 1682 Classified By: POLITICAL COUNSELOR ROBIN QUINVILLE. REASON: 1.4 (B) AND (D). ¶1. (C) SUMMARY: Prime Minister Kostas Karamanlis's ruling New Democracy party achieved a narrow victory in September 16 elections, giving it a slim majority in parliament. Karamanlis will meet with President Papoulias at noon local time to receive his mandate to form a new government. Embassy recommends President Bush call Karamanlis with a congratulatory message as soon as possible after OOB in Washington. Big winners in the election were the small parties of both left and right. For the first time, the fa-right LAOS party will be represented in parliament, having received over 3% of the popular vote. Main opposition PASOK had its worse showing in years, prompting calls for the ouster of party leader George Papandreou. ND's small parliamentary lead (projected to be 152 seats in a 300 seat parliament) will make it more difficult for the government to move forward on its legislative priorities. It will also affect action on key issues for the U.S.: Afghanistan deployments, assistance to Iraq, Macedonia's NATO accession, and a bilateral PSI shipboarding agreement. END SUMMARY. OFFICIAL RESULTS -------------- ¶2. (SBU) With 99.14 percent of votes counted, still "unofficial" results for the September 16 elections released Monday morning gave ruling New Democracy a slim majority in parliament, while boosting smaller parties on the left and right. -- New Democracy: 41.85 percent 152 seats -- PASOK: 38.11 percent 102 seats -- KKE (Communists): 8.15 percent 22 seats -- SYRIZA (Synaspismos): 5.03 percent 14 seats -- LAOS: 3.79 percent 10 seats These results will be confirmed as "official" by the Interior Ministry during the course of September 16. PM Karamanlis will meet with President Papoulias at noon local to receive his mandate to form a new government. ¶3. (SBU) The comparison with the 2004 election is telling. At that time, ND won a "commanding" majority; it has lost 13 parliamentary seats this round. For comparison, 2004 results were: -- New Democracy: 45.36 percent 165 seats -- PASOK: 40.55 percent 117 seats -- KKE: 5.9 percent 12 seats -- SYRIZA: 3.26 percent 6 seats -- LAOS: 2.19 percent 0 seats SMALL PARTIES BIG WINNERS -------------- ¶4. (C) Karamanlis called the elections in mid-August before wild fires took scores of lost and damaged wide swaths of the country. Fast action by the government to pump money into ravaged areas helped stem the tide against the government, but ND still saw its parliamentary majority reduced from 165 to 152 seats. Far-right, nationalist LAOS will for the first time enter parliament, while the communists and the leftist Synaspismos also saw significant increases in their parliamentary standings. The big loser was main opposition PASOK, whose showing was the worst in a generation -- its representation in parliament falling to 102 seats. PASOK head George Papandreou is already facing calls for his ouster, to which he has responded with a promise to hold a leadership referendum. WHAT IT MEANS FOR U.S. INTERESTS, GOG PRIORITIES -------------- --- ¶5. (C) Amid street celebrations by ND party activists, Karamanlis claimed a clear mandate and promised to move ahead with reforms. However, his slim parliamentary majority will make progress on thorny issues difficult. Even in the last parliament, where ND had a more comfortable majority, the government had to compromise on one of its signature initiatives: education reform. For the government to tackle even tougher reforms -- including pension reform -- it will have to work hard to keep ND parliamentarians in line. ¶6. (C) Karamanlis's narrow majority will also affect our bilateral agenda with the GOG. LAOS's strong gains -- and hard-line views on Macedonia -- will have an immediate impact on our dialogue with the GOG on Macedonia's NATO accession, as parliamentary ratification will be even more unpredictable. On issues where we have worked quietly with this government, such as troops for Afghanistan and assistance for Iraq, it will be harder to get GOG agreement to plus-up its efforts. Our effort to sign and ratify a bilateral PSI shipboarding agreement is less controversial, but will require strong support by the government (and the shipowners) to move through the new parliament. Education reform, while largely a domestic issue, is also an issue of concern to the U.S., as it affects the ability of private U.S. institutions to operate in Greece. ¶7. (C) On the economic front, many of our priority issues are more technical in nature and may still move forward even with a reduced ND majority. We continue to anticipate steady, if slow, progress in combating IPR violations and spotty progress in combating AML/TF (NOTE: not least because the president of the GOG,s FIU is in hot water for his handling of the poltically sensitive bond scandal during the campaign period). We also do not anticipate greater difficulties in working with the GOG on energy issues or fire assistance. On the latter, in particular, the GOG is likely to want to collaborate especially closely in order to avoid further criticism as the rainy season hits with the risk of flooding and to ensure that next year,s fire season is better managed. COUNTRYMAN