Greece has weathered a tumultuous week of falling bond prices, a second downgrade of its sovereign credit rating, and controversial proposals by George Papandreou, prime minister, to tackle the country’s debt crisis.
But Greece’s financial plight is barely on the agenda of the veteran power-brokers who operate from the gleaming new headquarters of the governing Panhellenic Socialist Movement, or Pasok, in central Athens.
Rather than the political opposition, it will be these party leaders – supposedly Mr Papandreou’s allies – who hold the key to whether his cuts and other measures take hold and Greece regains some credibility with international investors.
Yet the party, which laid aside its Marxist past in the 1990s to become one of Europe’s most popular social democrat movements, is full of volatile personalities and riven with ideological splits, making the task for Mr Papandreou of keeping its backing all the more tricky. Pasok swept the last elections in October with 44 per cent of the vote and has won six of the nine elections since 1981.
“If there’s a confrontation [between party factions] all the reform policies might be flung overboard – with potentially disastrous consequences for Greece,” an ally to Mr Papandreou said.
In a further twist, the prime minister has to live with the enduring myth around his father, Andreas Papandreou, Pasok’s founder and Greece’s first socialist prime minister – limiting the current office holder’s room for manoeuvre.
He is relying on “new Pasok” – his personal circle of western-educated advisers – to pull Greece clear of defaulting on its huge public debt. George Papaconstantinou, the finance minister and former party spokesman, is a prominent member of the group.
The party power-brokers belong to “deep Pasok”, a much larger group of senior party officials, union leaders and former cabinet ministers with a large popular following. They could overturn Mr Papandreou’s reform agenda.
“This group dismisses Greece’s financial predicament as a short-lived west European conspiracy to discredit the socialist government,” said a socialist policymaker
Members of “deep Pasok” are pushing for a larger role for the state in the economy in spite of the government’s commitment to improving competitiveness and shrinking the public sector.
“Keeping this powerful faction on board is the one of the biggest challenges for this government,” said a member of Mr Papandreou’s own group.
Members of “deep Pasok” still cultivate the myth of the elder Mr Papandreou, presenting him as a brilliant US-trained economist who came home to deepen democracy and raise living standards for ordinary Greeks. A press officer at the party’s headquarters, was keen on Friday to highlight the link on Pasok’s website to the Andreas Papandreou Foundation and its electronic archive of his speeches and articles.
But, paradoxically, it was the late prime minister’s generous spending policies during the 1980s, supported by a steady annual increase in foreign borrowing, that laid the foundations for Greece’s current debt crisis.
Squeezed between the two factions, the younger Mr Papandreou has been trying to keep a balance within the government.
Economists and policymakers were shocked when he split the finance minister’s position into two jobs with equal ranking.
While Mr Papaconstantinou tries to bring the deficit under control – and attends Ecofin meetings in Brussels – Loukas Katseli, a former economic adviser to Andreas Papandreou, is in charge of public investment. Ms Katseli is seen as a standard-bearer for the old guard. She has come out against Mr Papaconstantinou’s decision, backed this week by the prime minister, to freeze civil servants’ salaries above €2,000 ($2,900, £1,800) monthly and cut their allowances by 10 per cent.
Mr Papandreou’s balancing act could be hard to sustain.
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