As we go into 2012, here are the biggest questions on my mind for the next 12 months.
#1. When will elections happen? Perhaps the biggest question. Will elections happen, as initially agreed upon, by the end of February? Or will this transition government be given a mandate to govern for longer? And if it does govern longer, will it continue to enjoy wide parliamentary support? Another way to ask the question is: will Antonis Samaras put country above personal ambition?
#2. Will Loukas Papademos continue to be popular? So far, the newly appointed prime minister has enjoyed good ratings. In fact, over the past month, he has managed to win over many of the people who had no opinion of him before November, meaning he is making a good first impression. Will this last or will the friction of power take its toll? And if remains popular will he be able to do things that George Papandreou could not?
#3. Will progress on reform be stronger? After a strong start in 2010, progress on reform slowed in 2011. Will the reform program be adhered to better? Will the government stand up to special interests and unions? Will the bill to open up professions truly open them up or will exemptions water it down significantly? Will the government bite the bullet and fire people from the public sector?
#4. What kind of participation will there be in the haircut? The government is reporting good progress in its discussions with the private sector over the haircut. What will the participation rate be? Will there be holdouts or any conditions attached to the haircut?
#5. What conditions will Greece commit to get a second bailout? Besides implementing the first bailout better and besides negotiating a haircut, the government also needs to negotiate a new bailout agreement. What will those conditions be? What new areas will come under the troika’s jurisdiction? What are the new areas of reform?
#6. Will privatizations happen? The government has budgeted to raise €6 bn from privatizations in 2012. Will those privations happen? Already the targeted privatizations for 2011 have mostly slipped. Will that change? And what price will various assets fetch under these tough economic conditions?
#7. Will Greece hit its revenue target? Greece’s fiscal plan for 2012 is heavily weighted towards increasing revenues, which will be tough to do in an ever contracting economy. Much depends on better tax collection. Can the government raise revenues in an economy that will shrink by 2.8%?
#8. Will the economy rebound? Almost every forecast for GDP during this crisis has proven to be optimistic. The economy is expected to grow in 2013, but then again, it was supposed to grow in 2012 as well. Will Greece continue to experience a deepening recession or will the economy hit bottom in 2012 and then start to recover?
#9. Will Greek society implode? Greek society is at a breaking point. Tensions are high, protests are continuing and frustration is mounting. Violence, at least at the criminal level, is growing. Mental and physical health is deteriorating and suicide rates are rising. Will society keep making sacrifices or will it give up? Will the government have the leadership and vision to keep the country together for another one or two years until the economy turns?
#10. Will the Eurozone implode? The final big question for Greece is the future of the Eurozone. With Italy in trouble and with markets being generally skeptical of new measures that Europe’s leaders promulgated in December 2011, what happens to the Eurozone is a big question mark. More and more economists are betting on the breakup of the Eurozone. Are they right? What happens to Greece then?
Lots of questions for 2012. Stay tuned on www.greekdefaultwatch.com/ for answers. May 2012 turn out better than 2011.