BLBG:Greek Election Gridlock Raises Risk for Bailout, Euro Future
Greece’s political leaders struggled to find the support needed to form a coalition government after voters flocked to anti-bailout parties, calling into question the country’s ability to impose the measures needed to guarantee its future in the euro.
New Democracy won 20 percent of the total vote with more than 50 percent of the ballots from yesterday’s elections counted at 12:30 a.m., according to the Interior Ministry website. Socialist Pasok, which partnered with New Democracy in securing a second rescue package for the country, trailed in third place with 42 seats. Official projections predicted the two would fall one short of the 151 seats needed to win a majority.
Syriza, a coalition of left parties which has vowed to cancel the bailout terms, got 16.1 percent and has 49 seats as the second-biggest party, boosting its showing from the 2009 election nearly four-fold. The new Greek parliament will have three new anti-bailout parties represented.
“The chance of a pro-EU bailout coalition of New Democracy and Pasok is on a knife-edge,” Sarah Hewin, senior economist at Standard Chartered Plc, said in an e-mail. “The scale of opposition is such that even if a pro-bailout coalition can be formed it will be tough for the new government to push ahead with further austerity, risking a halt to EU bailout finance. This test could come within weeks.”
EU Voter Anger
As voters across Europe punish governments for failing to control a debt crisis triggered by Greece, New Democracy leader Antonis Samaras said he’d try to put together a government of “national salvation” that will keep the country in the euro area, a plan echoed by Pasok leader Evangelos Venizelos.
“I asked for a strong mandate,” Samaras said in statements in Athens yesterday. “The people decided otherwise.”
As leader of the biggest party, Samaras is due to receive a three-day mandate today to try and form a government. That mandate will pass to the head of Syriza and then to Venizelos if efforts fail. After those nine days, President Karolos Papoulias will call all parliamentary leaders together to see if a government can be formed.
Euro Falls
The euro dropped to a three-week low against the dollar after Greek voters ushered in a new period of political instability and Socialist candidate Francois Hollande defeated Nicolas Sarkozy in the French presidential election. The 17- nation shared currency traded at $1.3047 at 8:11 p.m. London time, from $1.3084 on May 4.
With anti-bailout rhetoric benefiting parties as diverse as Golden Dawn, which wants to put land mines along Greece’s borders to prevent illegal immigration, and Independent Greeks, which wants Germany to pay compensation for World War II war crimes, Pasok and New Democracy’s coalition partners are limited. Democratic Left, which got 18 seats according to projections, might be convinced to join because of its more clearly European orientation, said Lefteris Farmakis, a strategist at Nomura International Plc in London.
“It’s the only realistic coalition partner,” he said.
The Communist Party won 8.5 percent, according to the latest projections, and will get 22 seats. Anti-immigrant Golden Dawn got 7 percent of the vote, entering Parliament for the first time.
Anti-Bailout Success
The success of anti-bailout parties in yesterday’s Greek election may spark speculation about the country’s ability to push through the cuts needed to ensure funds keep flowing from Europe. At the same time, European taxpayers now hold the bulk of the country’s debt, meaning governments may have little option but to keep the country’s finances afloat.
Of Greece’s 266 billion euros ($345 billion) of debt, about 194 billion euros -- or 73 percent -- is held by the European Central Bank, euro-area governments and the International Monetary Fund, according to the Greek Debt Management Office in Athens. In 2010, before the first bailout, Greece owed about 310 billion euros, all to the private sector.
As projections fluctuated, the head of Syriza said voters had given him a mandate to renege on bailout agreements negotiated with the EU and the International Monetary Fund.
Greeks want “to cancel the memorandum of barbarity,” Syriza’s leader, Alexis Tsipras, said in statements televised in Athens on NET TV. He said he would begin talks with parties of the Greek left tomorrow to achieve that goal. The head of the Communist Party, Aleka Papariga, said she won’t team up with Syriza.
Second Rescue Package
New Democracy and Pasok, which have alternated in power since 1974, were partners in the outgoing caretaker government of Prime Minister Lucas Papademos, which secured a second rescue package earlier this year, saving Greece from financial collapse.
Under the terms of that 130 billion-euro package, which was accompanied by the biggest debt restructuring ever, international lenders expect to hear in June how Greece will achieve 11.6 billion euros of savings for 2013 and 2014.
“Political instability is at the gates for Greece,” said Farmakis. “Time is running out with the upcoming troika visit scheduled for late May or early June and a new round of austerity that needs to be decided by the end of June. Clearly the risk for a euro exit has increased markedly.”
The vote projection today said at least seven and as many as 10 parties may enter Parliament, underscoring fatigue over austerity and frustration with the politicians responsible for implementing it. Unemployment is almost 22 percent and for those under the age of 24 it’s almost 51 percent.
A total of 9.85 million Greeks, including 360,000 new voters, were eligible to cast ballots today.
To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net
To contact the editors responsible for this story: Andrew Rummer at arummer@bloomberg.net Craig Stirling at cstirling1@bloomberg.net
