The Morning After: What Happens Now to Greece/The Whole World

In yesterday’s Greek election, believed by many around the world to be a defining moment in the Eurozone financial crisis, the center-right/pro-bailout New Democracy (ND) party won, receiving 29.7% of the vote. The anti-austerity/radical left party SYRIZA, which pledged to scrap or renegotiate the bailout terms, came in second place with 26.9% . Due to the Greek parliamentary seat apportioning structure, which adds a 50 seat bonus to the party that wins the most votes, ND will have 129 of the 300 seats in the new parliament, while SYRIZA will have 71. Pro-bailout/Socialist party PASOK came in third place with 12.2% of the vote and 33 seats in Parliament. The rest of the parties, the including neo-Nazi Golden Dawn, are anti-austerity.

In a speech following the election, Antonis Samaras, the head of ND, reaffirmed his party’s commitment to the terms of the bailout and to Greece remaining in the Eurozone. “The Greek people voted today to stay on a European course and remain in the Eurozone…. There will be no more adventures; Greece’s place in Europe will not be put in doubt, the sacrifices of the Greek people will bear fruit.”

While the results of the election indicate a huge win for the pro-bailout side, there remains uncertainty in Athens. The combination of ND and PASOK would seem to be an easy enough coalition, with a combined 162 seats out of 300. Following the election however, PASOK leaders indicated that they would not join in a coalition with ND unless SYRIZA was also a part of the coalition, an idea SYRIZA head Tsipras ruled out without reservation. Having stressed the importance of the election and the importance of remaining on the Euro, PASOK’s post-election attitude is something of a mystery.

The Greek election process gives Samaras three days to form a majority coalition government. If he is unable to form a coalition, Tsipras will be given a chance to form a coalition. If no majority coalition is formed, as happened with the May election, Parliament will be governed by a caretaker Prime Minister, and the country will vote again, potentially in August or even later in the year. There is fear that the state will run out of money in its operating budget before then, a problem best solved by a real government rather than an interim caretaker.

PASOK, an ostensibly Socialist party, might seem make for an uneasy coalition mate with pro-market, pro-capitalist ND. But since 2009 PASOK has shifted to the political center, with former PM George Papandreou accepting the first two bailout programs, the terms of which demanded privatizations of parts the public sector and the reduction of benefits and pensions for government workers. Papandreou stuck to the German line as far as he could, until in February he lost the support of his own party, was forced to resign, and handed the government over to a new coalition of PASOK and ND led by European technocract Lucas Papademos. The party was seen by many in the country to have been a stooge for the neoliberal Merkel government in Germany and the PASOK brand was heavily damaged, the “Socialist” label seeming to apply in name only. The party, which had won the election in 2009 with 43.9% of the vote, fell to 13.1% in the past election, and again to 12.3% in this election.

Given this, it is possible that the new party leader, the ambitious Evangelos Venizelos, wants reclaim his party’s leftist identity. As this election became essentially a referendum on the bailout with ND on one side and SYRIZA on the other, the reason for PASOK even to exist became a real question. Given this recent slide, maybe Venizelos’s declaration that PASOK would only join in a coalition with SYRIZA is an attempt to position his party back to the left, attempting to find a niche between ND and SYRIZA.

It is also possible the Venizelos is simply making a power play. He might be using this threat as a bargaining chip in the negotiations to come with Samaras in order to wrest more decision-making power and control of ministries from ND in a coalition government. We saw in the last election that Venizelos, though strident that his party would not join an anti-bailout coalition led by SYRIZA, was rumored to have wavered in this pledge when he was approached by Tsipras, though the two never did reach an agreement.

The results must have come as a relief to Germany, which has maintained that there would be no renegotiation of the bailout terms. But in the run-up to the election there was speculation that Germany might consider easing the asuterity measures in order to give the Greek people some room to breathe. Following the election German Foreign Minister Guido Westerwelle said, “The substance of the reforms is not negotiable…. But clearly time was lost with the election and we have to talk about what that means for the reforms. We’re ready to talk about the time-frame as we can’t ignore the lost weeks and we don’t want people to suffer because of that.” This morning Prime Minister Angela Merkel reiterated that Greece must stick to the so-called “austerity measures.”

A strange aspect of this critical election was the surprising number of citizens who didn’t vote. 37.5% of voters didn’t show up to the polls. While a 62.5% voter turnout might seem very good in the U.S., it is an all-time low in Greek elections.

The reaction by markets was mixed. The Greek stock market rose 6.65% today with the banking sector up 15.7%. But the blase reaction of world markets thus far may indicate that the market believes a Greek exit from the Eurozone is inevitable, with the results yesterday only prolonging such a move. Much global attention has moved from Greece to Spain in recent weeks. As of midday, the Dow was actually down 0.13%. The British FTSE 100 gained only 0.22% and the German DAX gained a very modest 0.30%.

Comments