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Sun June 17, 2012
Greek Elections Could Decide The Country's Eurozone Future
Originally published on Sun June 17, 2012 3:47 pm
It's official: The conservative New Democracy party that supports keeping Greece in the eurozone is the winner of Sunday's election in that country.
The victory is likely to ease some of the concerns over a potential Greek exit from the eurozone, and the implications of such a move on the fragile global economy.
After the victory, Antonis Samaras, the head of New Democracy, called for pro-euro coalition, one that would likely include the socialist PASOK party, which finished third. The radical left-wing Syriza party, which opposed the bailout, finished second.
No one party had enough votes to form a government on its own.
According to The Associated Press: "With 82.5 percent of the vote counted, official results showed New Democracy winning 30 percent and 130 of the 300 seats in Parliament. The radical anti-bailout Syriza party had 26.6 percent and 71 seats and the pro-bailout Socialist PASOK party came in third with 12.5 percent of the vote and 33 seats. The anti-immigrant nationalist Golden Dawn party had 6.9 percent and 18 seats, while the Democratic left won 6.1 percent and 18 seats."
It was Greece's second national elections in six weeks. The previous vote on May 6 was inconclusive.
Reaction to the election results was swift.
The group of 17 nations the use the euro said the bloc "is convinced that continued fiscal and structural reforms are Greece's best guarantee to overcome the current economic and social challenges."
German Finance Minister Wolfgang Schaeuble said the result is " a decision by Greek voters to forge ahead with the implementation of far-reaching economic and fiscal reforms in the country."
Here's more from the AP: "Germany, Europe's biggest economy, has been a major contributor to Greece's 2 multibillion-euro rescue packages and a key advocate of demanding tough, and highly unpopular, austerity and reform measures in exchange."
In a congratulatory statement, the White House aid it hoped the election "will lead quickly to the formation of a new government that can make timely progress on the economic challenges facing the Greek people."
It said it was in everybody's interests that Greece " remain in the euro area while respecting its commitment to reform."
Here's our original post and earlier updates:
World markets and perhaps especially the members of the European monetary union are watching Greece very closely.
The country is voting on a new Parliament today, after a previous election left parliament deadlocked with no clear winner and without a coalition.
As The New York Times puts it, the parliamentary election is being seen as a referendum on the Euro. It could very well decide whether Greece remains in the union and continues to receive EU bailout funds, or departs the union throwing its own economy and potentially that of the world into an unknown and very tenuous place.
The voters have two main choices: On the left is Syriza, whose leader Alexis Tsipras has threatened to reneged on Greece's bailout deal with Europe. On the right is New Democracy and its leader Antonis Samaras, who favors renegotiating the EU deal.
As NPR's Sylvia Poggioli reports for Weekend Edition Sunday, there are a lot of unknowns about this election. It could turnout that, like happened in the previous election, there is no clear winner and the country will have to try again to form a coalition.
But one thing is certain, said Sylvia: The country is hurting.
Sylvia spoke to 35-year-old Theodore Pitsikas while he stood in line at a poll.
"I have three children," he said. "And I don't have milk to feed them."
Pitsikas is voting for Syriza.
But Sylvia says this is a tough issue for many Greeks. Many of them are scared of what could happen if Syriza wins a majority and bailout funds stop flowing.
"The electorate is split on this issue and it's not a left, right line, but a generational line and urban vs. rural," said Sylvia. "At the closing of the New Democracy rally the crowd was mostly elderly, many were bused in from outside Athens and at Syriza's closing rally the crowd was urban and young.
"In any case, the EU and the markets are going to have to come to terms with the fact that both sides in Greece say the bailout deal has not worked and it is more damaging than helpful and must be changed."
We'll keep this post updated with the latest, so make sure to refresh this page.
Update at 3:45 p.m. ET. Greek Conservatives Propose Coalition:
The head of the conservative New Democracy party is proposing a pro-euro coalition government.
Antonis Samaras says "the Greek people today voted for Greece to remain on its European path and in the eurozone." His comments were reported by The Associated Press.
New Democracy finished first in Sunday's election. The head of the radical left Syriza, which finished second, conceded the election. The head of the socialist PASOK party, which finished fourth, proposed a government of the four top vote-getting parties, including the anti-bailout Syriza and the smaller Democratic Left.
Update at 2:48 p.m. ET. Official Projections Put Conservatives Ahead:
Official projections are now confirming what exit polls have been predicting: the New Democracy party is coming in first in parliamentary elections.
The Associated Press reports: "The projections showed New Democracy as winning 29.5 percent and 128 seats. The radical left Syriza party, which has vowed to repeal Greece's international bailout conditions, is expected in second place with 27.1 percent and 72 seats. PASOK trails with 12.3 percent and 33 seats."
New Democracy and PASOK together would have enough seats to keep Greece in the eurozone.
Update at 2:10 p.m. ET. Conservatives Ahead In Vote, Exit Polls Say:
Updated exit polls show the conservative New Democracy party winning the elections that could well decide the future of the European Union.
The exit poll gave New Democracy between 28.6 and 30 percent of the vote, a share that would give it 127 seats in the country's 300-seat Parliament, The Associated Press reported. The radical left Syriza party is projected to get 72 seats. The Socialist PASOK party was projected to get 32 seats.
New Democracy and PASOK, Greece's two traditional parties, may have enough seats to form a coalition government, one that would keep Greece in the eurozone. Syriza wants a Greek exit from its international bailout commitments.
Update at 12:28 p.m. ET. Exit Polls Show Vote Is Too Close To Call:
Exit polls following the vote show that the left-wing Syriza party and the conservative New Democracy party are neck-and-neck.
According to the Associated Press, New Democracy is projected to win between 27.5 and 30.5 percent of the vote; Syriza party is projected to get 27 to 30 percent.
Update at 9:34 a.m. ET. What Happens If Greece Exits The Euro:
We keep hearing if Greece leaves the Euro it will have huge effects both on the country and globally. Bloomberg has a quick one-minute video that lays out the scenario for the country. Essentially, explains Bloomberg, if Greece decides to leave the Euro, it would be left with no banking system.
Eventually when it reintroduces its own currency, it's likely that because the country has defaulted on its debts, it will be almost immediately devalued by at least half, says Bloomberg, and that will plunge the country into a depression.
How it is expected to affect world markets is more complicated. But that problem has more to do with the country's default. Without an EU bailout, Greece can't pay its debts.
NPR's Robert Siegel recently spoke to Martin Wolf, chief economics commentator for the Financial Times. Wolf explained that a Greek default could create a banking crisis, because so many banks have loaned money to Greece. Here's the relevant part of their conversation:
SIEGEL: But just to explain. The reason for fearing a banking crisis here is that just as at one time banks were sitting on a lot of securities backed by and bad mortgages, in this case if they're sitting on a lot of securities backed by improvident countries, they would have to acknowledge losses and...
Dr. WOLF: Exactly. It will be in another round of bad debt that would, in a very interconnected financial system, have some global repercussions."
Update at 9:25 a.m. ET. 'An Expression Of Anger':
The Telegraph's Alex Spillius reports that turnout in northern Athens is high. He had interesting conversations with voters about the "memorandum," which is what Greeks call the terms of the EU bailout:
"Yiorgos Vrassidis, 55, said he wasn't a big fan of Syriza but voted for them as 'an expression of anger'. 'I hope they can lighten the pressure of the memorandum a little but it feels there is no light at the end of the tunnel for not only Greeks but all of southern Europe.'
"There are a lot of different opinions among Athens voters today, as you would expect with 21 parties running. But one common thread is that no one expects the coalition government that will be formed in the next couple of days to last long. I just met a man named Theodore Bouzas whom I interviewed at the same polling station last month. 'I hope I don't see you again soon,' he said, without much confidence."
Update at 9:10 a.m. ET. What Merkel Says:
German Chancellor Angela Merkel, one of the most important voices of the Eurozone, "urged Greeks not to walk away from international loan deals," CNN reports.
""We will stick to the agreements. That is the basis on which Europe will prosper," she said on Saturday, according to CNN. Merkel has been one of the strongest proponents of stringent austerity measures that have rubbed other European countries not faring as well as Germany the wrong way.
Remember, France recently voted against Merkel ally Nikolas Sarkozy in favor of French President Francois Hollande, who has promised to back down from some austerity policies.
How much Hollande gets done to that end will in large part be determined by legislative elections being held today.
"While his Socialist Party is projected by pollsters to win the largest number of seats in parliament, Hollande may also have to rely on parties that are anti-European and more adamant than he is about rejecting German-led austerity, which has been a key piece of the plan for Europe's crisis recovery.
"'Should the Socialist Party have to depend on the anti- capitalist, anti-globalization, anti-austerity Left Front, we believe it would pull the new government further to the left and open up wider divisions between Paris and Berlin over the handling of the euro-zone crisis,' Alastair Newton, senior analyst at Nomura International, wrote in a note to clients."