Further, the IIF noted that given the severe contraction of Greece’s economy, the pace of short-term budgetary adjustment needs continuous examination for potential easing: it should be recognized this might require modest additional financing support. With this approach, the efforts being made to carry out Greece’s difficult adjustment program should begin to bear visible fruit.

“At the same time, official creditors should recognize that in an environment of severe economic contraction, the pace of short-term budgetary adjustment needs continuous examination for potential easing: The point about the short-term budgetary adjustment may be applicable well beyond Greece, with a suitable degree of differentiation depending on individual countries’ circumstances. Such a balanced approach may allow for stronger growth in the near term while permitting more determined reform effort in the medium term,” IIF said in a news release.

In a presentation titles “Lessons from the Greek Debt Exchange:, at the Institute of International and European Affairs in Dublin, Institute of International Finance (IIF) chief Charles Dallara argued:

“We should understand in my view having spent a lot of time in Greece over the last 9 months, that what we are seeing there is not just an expression of frustration by the Greek people about quote austerity, but by an expression of frustrations of what they consider to see of 3 to 4 decades of really inadequate political leadership that has led them to this position, my sense, and I certainly don’t want to speak for the Greek people, but I’ve talked to a lot of people, and I had the privilege to live in Athens for two years a young naval officer so perhaps I feel I have my own touch of Greek roots, and my sense is that there is a profound sense of disappointment at where their political leadership from both the common parties that have guided them for most of the last decades has left them.

And a determination to seek new directions, by either new parties new leaders, or through the leaders of the old traditional parties trying to convince the Greek people that they see a way forward, and I think it’s going to take some time for this to shake out to allow the Greek democratic process to run its course. And I think it is incumbent on the rest of us, and that would include other European leaders, to pause in what has been a very popular game of how to tell the Greeks how to run their lives.”

It is far from clear, given past tensions and differences, that ND and PASOK would be sustainable coalition partners in the years ahead. A renewed ND-PASOK coalition, moreover, will be seen by many to lack the clear popular mandate needed to successfully implement the further adjustment and intensified reforms required going forward. Depressed support for ND and PASOK need not translate into a hung parliament, however, in which no combination of parties could achieve a majority. Constitutional rules make it more likely than not that election results in line with the most recent polls would make possible an ND-PASOK government with a majority of 8-15 seats.

An analysis of opinion polls taken between April 12 and April 20, the last day polls could legally be published before the May 6 elections, indicates that parties failing to meet the 3 percent threshold would have received 7 percent of the total vote, had elections been held then. As a result, ND and PASOK together would have required no more than 37 percent of the popular vote to secure a one-seat majority. While support for the two parties has declined from almost 70 percent in January 2011 to just under 40 percent in the most recent polls, support has recovered a bit from a low in March. Were support levels in these polls replicated in the election, the two major political parties actively supporting the EU-IMF programme would be able to form a government with 156 seats, sufficient for a narrow 8-seat majority.

A somewhat stronger coailtion could be plausible if the 3 percent threshold is cleared by the Democratic Alliance (DA), a center-right party headed by former Athens mayor Dora Bakoyannis that also supports EU-IMF reforms. Though receiving just under 3 percent support when the poll publication deadline was reached, DA had increased its standing since the start of the year. Expelled from ND in May 2010 for supporting the first EU-IMF program, DA is the only nongovernment party in the current parliament, and one of the few running for the next parliament, that has given clear support to the second EU-IMF program.

Should DA enter the parliament and join ND and PASOK, it could increase the majority wielded by an ND-led coalition with PASOK to as many as 15 seats. This would require a reconciliation, however, between Dora Bakoyannis and ND leader Antonis Samaras, IIF writes.

Prospects for programme implementation could be imperiled, on the other hand, if DA fails to clear the 3 percent threshold or if ND and PASOK fall short of the 38 percent combined support registered in the most recent polls. A hung parliament, in these circumstances, would likely require the continuation of an interim technocratic government, followed by new elections after a decent interval, perhaps later this year.

In a general comment, the Board of Directors of the Institute of International Finance (IIF) said it strongly supports the recent agreements among Greece, Euro Area authorities, and the IMF on a new adjustment and financing program for Greece, including the common understanding of the terms of a voluntary exchange of privately held Greek Government Bonds as presented in the February 21, 2012 statement by the Steering Committee of the Private Creditor-Investor Committee for Greece.

According to the announcement, “the decision to participate in the debt exchange lies exclusively with individual investors. The IIF Board is firmly of the view that a successful completion of the exchange will contribute meaningfully to facilitating the official financing for Greece and help Greece to carry out necessary reforms to set the basis for economic recovery. These are important steps towards resolving the Greek debt crisis, addressing the overall fiscal and sovereign debt problems in the Euro Area, and restoring financial stability, which is essential to foster economic growth and job creation.”