Greek Election Favors Pro-Bailout Party

June 18, 2012
By , The New York Times

ATHENS — Greek voters on Sunday gave a narrow victory in parliamentary elections to a party that had supported a bailout for the country’s failed economy. The vote was widely seen as a last chance for Greece to remain in the euro zone, and the results had an early rallying effect on world markets.

Greece’s choice was also welcomed by the finance ministers of the euro zone countries, who in a statement on Sunday night in Brussels said the outcome of the vote “should allow for the formation of a government that will carry the support of the electorate to bring Greece back on a path of sustainable growth.”

While the election afforded Greece a brief respite from a rapid downward spiral, it is not likely to prevent a showdown between the next government and the country’s so-called troika of foreign creditors — the European Commission, the European Central Bank and the International Monetary Fund — over the terms of a bailout agreement. Even the most pro-Europe of Greece’s political parties, the conservative New Democracy, which came in first, has said that a less austere agreement is crucial to a country where the unemployment rate is 22 percent and the prospect of social unrest is rising.

The euro zone ministers pledged to help Greece transform its economy and said continued fiscal and structural changes were the best way for Athens to cope with its economic challenges. “The Eurogroup reiterates its commitment to assist Greece in its adjustment effort in order to address the many challenges the economy is facing,” the statement said.

The ministers added that representatives of Greece’s creditors would return to Athens to discuss emergency loans and changes as soon as a government was in place.

Official projections showed New Democracy with 30 percent of the vote and 128 seats in the 300-seat Parliament. The Syriza party, which had surged on a wave of anti-austerity sentiment and spooked Europe with its talk of tearing up Greece’s loan agreement with its foreign creditors, was in second place, with 27 percent of the vote and 72 seats. Syriza officials had rejected calls for a coalition, ensuring its role as a vocal opposition bloc to whatever government emerges.

But unlike in the May 6 election, when New Democracy placed first but was unable to form a government, this time intense international pressure — and the fact that the Greek government is quickly running out of money — made it likely there would be a coalition with New Democracy’s longtime rival, the socialist Pasok party. Pasok placed third in the voting, with 12 percent of the vote and 33 seats. The extreme right Golden Dawn party got 18 seats.

Investors gave an early thumbs-up on Sunday night, pushing up the euro in value against the dollar. “It looks like we’ve avoided the worst-case scenario,” said Darren Williams, a European economist for AllianceBernstein in London. “I think that’s important, because we could have gone to a very bad place very quickly.”

Previous rallies in response to developments in Europe were short-lived. A few weeks ago, markets initially responded positively to a bailout plan for Spanish banks, but that optimism quickly gave out when the American stock markets opened that Monday.

The health of the world economy weighs heavily on the United States, and on President Obama’s re-election campaign. In recent days, Mr. Obama has increased the pressure on European leaders to find longer-term solutions to shoring up the euro. A White House statement on Sunday said, “As President Obama and other world leaders have said, we believe that it is in all our interests for Greece to remain in the euro area while respecting its commitment to reform.”

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