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