Greek’s economy is finally showing some signs of recovery, and it can be attributable to many things. Most recently, the Greek government’s recent arrest of several key figures in the country’s notorious extreme right wing political party, Golden Dawn, has been lauded by the international community as a big step forward for Greece, a nation that has suffered extensively from the European sovereign debt crisis.
Golden Dawn, which has been in existence since the 1980s, gained strong support in Greece as the crisis deepened—so much so that it has 18 representatives in the national parliament—based largely on its opposition to the very unpopular austerity measures Greece is mandated to follow by the Troika.
The party’s populist approach, which included handing out free food, further endeared its cause to angry, long-suffering Greeks. But just as its increasing popularity resulted in a stark polarization of Greek politics, Golden Dawn’s virulent anti-foreigner thrust and numerous criminal activities also invited sharp criticism from both inside and outside Greece, according to John Diamondopoulos, senior lecturer in finance at the European Business School in London, particularly since the government of Prime Minister Antonis Samaras did not address Golden Dawn in any meaningful way until last week.
Now, the government’s crackdown on the party and its members for criminal acts has inspired renewed confidence in Greece’s government and boosted credibility in the country’s political system, Diamondopoulos said. “Going after Golden Dawn in a meaningful way has shown political will and it strengthens the government’s position to tackle the bigger issues that Greece continues to face,” he said.
Following the government’s tough stance, the Greece 20 ETF (GREK) rose by 2.5%, according to Diamondopoulos, as testament to renewed investor confidence in the country.
Although the Greek coalition government is still fragile, the resolve shown by Prime Minister Samaras strengthens his New Democracy party, Diamondopoulos said, while also weakening both the extreme right and the extreme left, which has argued for Greece to leave the Eurozone.
Its political willpower also puts the government on a firmer footing to be able to negotiate with the Troika for yet another bailout package for Greece—one that experts including Ben May, chief European economist at Capital Economics in London, believe that Greece won’t be able to do without.