Greece election: Temporary relief for eurozone

Antonis Samaras, the leader of the conservative New Democracy party, on election night 17 Jun 12 Antonis Samaras faces a new round of tough coalition negotiations

You could almost hear the sighs of relief coming out of Brussels and Berlin when the results from the Greek election were finally established.

One fact stood out above all others from a chaotic and confusing night: Greece, in the short term, would not be leaving the euro with all the chaos that would flow from it. Central bankers and European finance ministers, who had been on standby, could relax just a little.

Like so much in the eurozone, a step is taken that buys time but little more. The winner was Antonis Samaras, the leader of the conservative New Democracy party. He defined the election as a choice between staying in the euro or returning to the drachma. Despite that stark choice only 40% of voters backed parties that supported the bailout deal with the EU and the IMF.

The message from Greece was once more that they wanted to stay in the euro but not at the price of the austerity measures they were enduring.

The outcome does not offer stability to Greece. Waiting in the wings will be a new powerful opposition leader, Alexis Tsipras. This leftist radical got 27% of the vote by promising to tear up the bailout agreement, even whilst insisting he wanted to stay in the euro.

Shortly after the results Mr Samaras said he wanted to build a government of national unity. But Alexis Tsipras wanted nothing to do with it. His calculation is that this new coalition government will last just a few months. Last night he told his supporters: "very soon the left will be in power". And, for good measure, he repeated a message that found such resonance with the voters: "overthrowing the bailout was the only solution". He sounds like a politician not unhappy to be on the sidelines for a short period.

More hard bargaining

Mr Samaras's first priority will be to form a convincing coalition. He will get the support of Pasok, the Greek socialists. That coalition, in itself, brings with it problems. They are the two parties that have governed Greece for the past 30 years and are blamed for many of the country's problems.

Bailout deal - Greek pledges

  • Cut 15,000 state sector jobs this year - aiming for 150,000 to be cut by 2015
  • Cut minimum wage by 22%, to about 600 euros a month
  • Pension cut worth 300m euros this year
  • Spending cuts of more than 3bn euros this year
  • Liberalise labour laws to make hiring and firing easier
  • Boost tax collection
  • Carry out privatisations worth 50bn euros by end of 2015
  • Open up more professions to competition, eg in health, tourism and real estate
  • Greece aims to cut its debt burden to 116% of GDP by 2020

Once he has formed a government his immediate challenge is the bailout agreement. Although he accepted the basic terms of the deal he insisted during the campaign that he wanted concessions. It should be remembered that when Pasok was in power he opposed many of the austerity measures, saying that what Greece needed was growth.

If he is confirmed in power he will have a stronger opposition breathing down his neck. He will say to Europe that he has anchored Greece in the eurozone and wants something in return. That will be difficult. Already the German Foreign Minister Guido Westerwelle has come out and said that the substance of the Greek reform (bailout) programme is non-negotiable.

Where there might be some flexibility is over the timing of the implementation of reforms. There may also be some movement over interest rates on the loans and the EU might offer Greece some funds to boost growth.

But the message is clear - the austerity programme with its budget and spending cuts will stay. The German finance minister underlined that message when he said "Greece's path will be neither short nor easy".

And therein lies the instability. The Greek economy is in freefall. The country is in the fifth year of recession. Unemployment is at 22%. Real wages - for many people - are down by 25%. The streets bear the scars of social breakdown. The country does not have much time.

What happens in Greece will be influenced by the outcome of the current tension between France and Germany.

Hollande growth agenda

The French President, Francois Hollande, will be emboldened by his victory in the French parliamentary elections. His Socialist party controls the Elysee Palace and parliament. The French view is that "Europeans need to help Greeks return to growth".

Mr Hollande will push hard for his growth first agenda. He wants more flexibility on meeting deficit targets. He wants a European banking union that contains a joint deposit guarantee scheme. He is pushing a 120bn-euro (£97bn; $152bn) growth covenant for Europe. Chancellor Merkel is cautious as usual. In recent days there have been several warnings from Berlin that Germany cannot take on all of Europe's debts.

And then it should not be forgotten - Greece had the ability to spark a severe crisis.

But the future of the eurozone will be determined by what happens in Italy and Spain. And here two fundamental questions remain unanswered. If those economies get into difficulty what will stand behind them, how will they be supported? And - perhaps most importantly - where will growth come from to relieve two countries mired in recession? Without those answers the can is still just being kicked down the road.

Gavin Hewitt, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this

    Comment number 133.

    98 Grant Collier

    You could say that the predictions of some contributors on this forum are coming true in that Americans are taking over the world.

    But this report indicates that space rather than power is the key word.

    If they all ate less not only would they help conserve the world's resources but we would also see less of them!

  • rate this

    Comment number 132.

    "Greece has a rule that gives the leading party 50 extra seats."

    Does anybody know another country anywhere with a similar rule?

  • rate this

    Comment number 131.

    are we in denial of corrections inprogress that are inproving the causes of this financial evolutionary
    correction. reality is setting in ,laundry being done
    publicly and bandade solutions that fail are punishing
    all concerned. I like it.

  • rate this

    Comment number 130.


    Nothing in this crisis is about bailout ONLY and much more a question what is sustainable in longterm for Europe.
    Expensive is RELATIVE as a house price in Dublin or Barcelona.Time is the most essential good for Germany and the strong EZ countries.
    As there position does not differ from GE

  • rate this

    Comment number 129.

    120 LucyJ
    "In choosing the Euro over Europeans Europeans put money over people European debt crisis is the result"

    Odd how Americans hold the strong belief that Anne Coulter's hogwash makes a dent even on European opinion making

  • rate this

    Comment number 128.

    Greece has done what Germany wants. It's now time for Germany to do what everyone else wants.
    Either :
    1 - Give the money back that they got through the unfair advantage of having the cheap euro at the expense of the southern europeans. (Not as loans)
    2 - Create the 'neuro' and take the rich club with them, leaving the euro to float down to a value that the rest can live with.

  • rate this

    Comment number 127.

    @125 What makes you think there will be a total collapse of democracy in Greece? The govt may collapse, but why should another not then be elected? I know the Greek democracy has its problems, but I doubt it will collapse entirely

  • rate this

    Comment number 126.

    Goenzoy: ONLY the essential

    If Germany thinks Greece is expensive
    Italy, Spain+France will be outrageous

    The future of Europe is up to Germany

    They were the ones who made the decision to bail out Greece+
    now its up to them to decide if they want to bail out rest of Europe, too

    I would say Germany is by far the most powerful country in Europe
    because your fate rests in their hands

  • rate this

    Comment number 125.


    I am referring to the period since the junta.
    Frighteningly it would not surprise if Spain isn't far behind, their demoracy only dating to post-Franco.

  • rate this

    Comment number 124.

    118 democracythreat
    "That is the party line, right? Debt fueled growth forever! Magic money, never to be repaid"

    Tripe matching your references to USSR, pogroms, Jew burning, comrades and inflated rethoric of the sort. Except Greece all debt is being repaid.

  • rate this

    Comment number 123.

    @121 What do you mean "Greece's short-lived democracy"?

    Are you referring to the time since the toppling of the military junta?

    Or do you mean that this current govt is likely to fall fairly soon? If so, there is nothing to say fresh DEMOCRATIC elections will not follow

  • rate this

    Comment number 122.

    120. LucyJ

    Lucy Germany dont need to do the hart bits ONLY the essential what is necessary to keep up the status quo.

  • rate this

    Comment number 121.

    How long can Greece's short-lived democracy last?

    Seems it can only be a matter of months rather than years. And when it caves in, so will their right to membership of the EU (democracy being a fundamental requirement). The arrogance of those who prematurely forced the Euro on an prepared Europe don't look so clever now do they?

  • rate this

    Comment number 120.

    Its all really up to Germany+whether they want to bail out all of Europe

    Its seems Germany, even though they are one of the most powerful economies in world, has bitten off more than they can chew

    There may be temporary relief but its no solution to Europe's debt woes

    In choosing the Euro over Europeans
    Europeans put money over people+
    European debt crisis is the result

  • rate this

    Comment number 119.

    Geo squared speaks a lot of sense. A lot of people did not want to vote for ND because they (along with Pasok) caused the problem in the first place, and they are seen as being totally corrupt. Would you ask an arsonist to assist in putting out the fire??

  • rate this

    Comment number 118.

    George Soros is hardly impartial. He is no doubt massively exposed to widespread euro default. But, yeah, he says the evil capitalists are picking on the poor innocent EU. Those evil "market people"!

    The implication is that there is nothing wrong with debt fueled growth.

    That is the party line, right? Debt fueled growth forever! Magic money, never to be repaid. More power to the soviet, comrade

  • rate this

    Comment number 117.

    Andy The Thinker

    Not really Germany suffers more from skill shortage as many people will retire in the next years.,,15996135,00.html

  • rate this

    Comment number 116.

    72.margaret howard; Margaret, once again you contribute trivial, unconnected and frivolous drivel + the standards of your blogs are beginning to make qot's seem plausible....God forbid!

  • rate this

    Comment number 115.

    112 OP
    "They have to say something believable about communalisation of debt about which they can offer a different dimension to their electorate"

    Well some sense is downing there. In a column of the Suddeutsche Zeitung by Catherine Hoffmann recently you could read something like: "When you take a common currency you damn take even the common risks".

    "Damn" is mine.

  • rate this

    Comment number 114.

    108.Chris Forse

    DONT MESS up 2 things.Austerity is WORKING.People DONT LIKE it because its PAINFUL and not because its not working.


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