Election Results for Greece - Fred Dunsel (06/18/12)
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As reflected in the opinion polls in the run-up to the 17 June election, Greek voters narrowly supported pro-austerity conservative and socialist parties, thus temporarily easing initial fears of the country’s imminent exit from the euro zone. According to official projections, the conservative New Democracy Party, which supports a bailout agreement that Greece had agreed to earlier this year, won 30% of the vote and 128 seats in the 300-seat Parliament. This allows it to form a coalition government with the socialist Pasok party which won 12% of the vote and 33 seats. Meanwhile, the Syriza party, which had strongly rejected the bailout agreement, won 27% of the vote and 72 seats, cementing its role as the key opposition force to the new government.
While the electoral results brought about a sense of relief to global markets, it is likely to be a very short one, given that Greece’s fundamental economic problems remain unresolved. In addition, there is a growing sense that the euro zone’s economic strains (as recently shown in Spain having to secure a $125 billion bailout for its banks) might become untenable in the long run.
Nonetheless, given the narrow margin of victory for the pro-bailout parties, analysts believe that the other euro zone members would now try to accommodate the new government in Greece to allow latter to more maneuvering space to implement the necessary austerity measures. (The New Democracy Party, which has extended its support by 10% from its previous performance in May’s elections, had also campaigned on securing some relief from the austerity measures.) As a sign of possible flexibility on the EU side, German Finance Minister Wolfgang Schauble said, after the election, that there would be consultations to “work toward making the adjustment program succeed”, while German Foreign Minister Guido Westerwelle said, “I could imagine that we do something about the time frame.”
Given the fractious nature of Greek politics, it is still an unknown whether the coalition government can last long or have the political will to implement widely unpopular measures. Hence, while many analysts expect financial markets to turn positive on Monday over the electoral results, it also came with the caveat that the rally might fade or even reverse quickly.