Greece Caught in the Labyrinth

Reasonable people expected that Prime Minister Andreas Papandreou would suffer heavier losses. He had campaigned for the June 18 parliamentary elections amid a series of scandals linking some members of his government to huge embezzlement, fraud, payoffs and illegal arms deals. On top of that, there was his public romance with Dimitra Liani, a former airline flight attendant half his age. But Papandreou's Panhellenic Socialist Movement (PASOK) slid only far enough to lose its majority. And since no other party won more than half the seats, Papandreou, who was hospitalized in serious condition last week with lung, heart and kidney complications, is staying on as caretaker Prime Minister while the struggle continues to form a government.

The major beneficiary in the balloting was Constantine Mitsotakis' conservative New Democracy Party, which won 145 seats, just six short of control in the 300-seat Parliament. The New Democrats campaigned on the promise of "catharsis," which included investigating and prosecuting political bigwigs implicated in several cases of alleged fraud that involved millions of dollars, including the embezzlement of more than $210 million from the Bank of Crete by its former owner George Koskotas.

For the first time, the Communists in Greece hold the balance of parliamentary power. The Alliance of the Left, which the Communists dominate, won 28 seats and could form a government with either PASOK, which holds 125 seats, or New Democracy. Communist Party leader Harilaos Florakis also demands catharsis but so far has refused to consider entering a coalition under either Papandreou or Mitsotakis.

Before he fell ill, Papandreou, 70, hoped to talk the Alliance of the Left into joining PASOK in "a coalition of the progressive forces." He dismissed the financial scandals, claiming they are simply plots instigated against him by "foreign and domestic forces." But last week another scandal was revealed as U.S. authorities arrested 14 employees of the National Mortgage Bank of Greece on charges of illegally transferring about $700 million to the bank's central office in Athens, apparently to avoid paying taxes.

While the political parties continue to look for a possible deal, the business of Greece has come to a halt. Since there is no elected head of government, President Christos Sartzetakis will represent Greece at this week's European summit in Madrid. Negotiations with the U.S. for a new agreement on American military bases in Greece must await a functioning government. A long-overdue austerity program is also on hold. "The country is running itself now," said Parliament member George Voulgarakis.

The Alliance has proposed a short-term "ecumenical government" made up of public figures who are acceptable to all sides. Such a transition team would be assigned to set the cleanup in motion and then take the country into new elections. As Papandreou's health deteriorated last week, many in Athens believed it might be the one way out of the labyrinth.