Uncertainty over Greek election result rattles markets
Greek voters have decisively rejected the German-driven focus on budget discipline, offered as the only solution to Greece’s continued membership of the Eurozone.
The Greek governing coalition comprising the main pro-EU parties, which has been pushing through the austerity package demanded by the EU, lost control of Parliament after voters went instead for extremist parties calling for a renegotiation of the bail-out terms agreed with Brussels.
Between them, centre-left Pasok and centre-right New Democracy, which have dominated Greek politics since the 1970s, polled 32% of the votes, giving the pro-EU coalition 149 seats out of 300 in Parliament.
New Democracy (ND) gained most votes, with almost 19%, down from 33.5% in 2009. Radical left-wing party Syrizia came second with 16.7% (up from 4.6%), pushing Pasok into third with 13.2% (down from 44%).
ND, headed by Antonist Samarast, will have to start work on forming a new governing coalition, though observers have suggested the low voter turn-out leaves any such coalition without ‘moral legitimacy’. Forming a pro-bailout coalition cabinet will prove a real challenge. One Greek observer speaking to the BBC said: “all Hell has broken loose. Parliament is now made up of clowns and thugs. It is a circus of madmen.”
Estimates suggest between up to 65% of voters voted for anti-austerity parties. Syrizia gained most from this trend but Golden Dawn, the ultra-nationalist party, gained about 7%, worth 20 seats in Parliament.
Greece now faces months of uncertainty, unsettling the credit markets. A failure by ND to build a new coalition would open the way for Syrizia to form an anti-bailout cabinet, with the main aim of renegotiating bail-out terms. German Chancellor Angela Merkel has already ruled out any prospect of that happening. If all attempts at forming a government fail, fresh elections will follow in June.
The uncertainty surrounding the Greek election results has combined with the arrival of the new Socialist President of France to depress the markets. The value of the Euro fell 1% against the USD; equity markets also fell sharply (Germany’s Xetra -2.2%, France’s CAC -1.8%, Italy’s MIB -1.8% and Spain’s Ibex -1.7%), while bond yields in the Eurozone’s periphery economies continued to climb. Greece’s 10-year bond yield rose 23 basis points to 20.1%, reflecting falls in Spanish and Italian debt.