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 Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this

    Comment number 333.

    332 Chris

    Once again you show yourself up getting the facts wrong as Kilroy-Sik is an Independent not a UKIP MEP. Says it all why let facts get in the way

    "Robert Kilroy Silk stood successfully for the UK Independence Party (UKIP) in the 2004 election to the European Parliament, before leaving them in 2005 to found a new party called Veritas

  • rate this

    Comment number 332.

    295.margaret howard
    Once again you show yourself up by getting the simple facts wrong as Robert Kilroy-Sik is an Independent not a UKIP MEP. Says it all doesn't it why let the facts get in the way of your story.............

  • rate this

    Comment number 331.

    #330 LSP

    " How is it that 6 weeks on they are now going to form a government?"

    -- to get more money from EU tax payers -- nothing sinister.

  • rate this

    Comment number 330.

    Re a Greek coalition government, on the 6th of May ND was 1st, Pasok 2nd and together with the Democratic Left (DL) had a total of 168 seats. They were unable to agree to form a government. This time ND was 1st again and together with Pasok and DL the same 3 have now 179 seats. How is it that 6 weeks on they are now going to form a government? Unclear.

  • rate this

    Comment number 329.

    The Euro can only survive if there are two huge sacrifices.
    One is the German taxpayers being willing to endlessly stump up billions of Euros.
    The other is for European governments giving over sovereignty of the budgets to the EU.
    I expect to see flying pigs before either happen.

  • rate this

    Comment number 328.

    316 power
    "ship carrying Russian attack helicopters to Syria for homicidal Assad was forced to go back to putinesque Russia.
    FT 13.6.
    Ahead of G20 mtg Russia and US blame each other for violence in Syria with Russia claiming it completed contracts paid for long ago solely for air defense systems while US continues to supply Syria with equipment to suppress peaceful demonstrations.

  • rate this

    Comment number 327.

    #325 shpg13

    -- We are looking at the same evidence -- but reach different conclusions.

    -- Your ´Total European Ruination´ has existed long before the Common Market. The EU and Euro has shown that Europe (incl UK) cannot change their ways.

    -- incompetent Govts are rampant -- and most of their citizens wobble at the knees at the sight of their flag.

    --Europeans have failed -not EU or Euro

  • rate this

    Comment number 326.


    A head of Deutsche Bank Investing (Georg Schuh)

    --the sooner Greece leaves --the better.

    --Greece out --Poland in ?

    -- The Eurozone will likely break up-- and is (he claims) already ´priced in´

    -- Those who don´t ´make the grade´ should be ´allowed´ to leave.

  • rate this

    Comment number 325.

    321.quietoaktree ; Your reply simply strengthens my claim!
    I thought you were pro -EU too....seems I read you incorrectly, I apologise...welcome to the 'Common Sense Party' aka 'Disband EU before Total European Ruination'

  • rate this

    Comment number 324.

    314 smroet

    "I just hate it when people come up with citations torn from their context, to score a dubious debating point."

    Now you spoilt a good powermeer story - but that's what he does best.

    At 313 he cites a BBC report:
    "Spanish benchmark 10-year bonds hit a record high of 7.1%" conveniently forgetting that Spain's interest rates were never below 7% before it joined the EU.

  • rate this

    Comment number 323.

    When a nation or group of natons united under a single currency has net negative equity, that is they owe more money than they are worth they are in trouble. Does Europe have net negative equity? I wouldn't buy any of it, I'd be a seller. It seems Germany may wind up owning all of Europe.Then it will be broke too! I think the concern at least among Americans is unwarranted.

  • rate this

    Comment number 322.

    Quotes from inside the EU,
    Maaten Engwirda, financial watchdog is systematically sabotaging investigation into fraud. France and Italy worse offenders.

    To my knowledge Italy is the only country which has a specific Financial Police. And yet a level of corruption/tax evasion which puts Cosa Nostra and Ndrangheta combined to shame.

    [been there, seen that]

  • rate this

    Comment number 321.

    #310 shpg13

    "QOT's and Margaret's continual vicious attack on the Greek Nation,"?

    -Those were the compliments based on facts -- wait for the attack !

  • rate this

    Comment number 320.

    Re #317 smroet

    "stop being pleased, look into your mirror, and see whether you are really want to be associated with your "comrade" Nigel Farage, who started all this questioning on Barroso's holidays."

    Since I'm not a Brit I can hardly support Farage or Cameron.

    But knowing v. well Barroso's Socialist background I have about as much sympathy for him as for Joshka Fischer or Con-Bandit.

  • rate this

    Comment number 319.

    Quotes from inside the EU,
    Maaten Engwirda, financial watchdog is systematically sabotaging investigation into fraud. France and Italy worse offenders.
    Marta Andreasen, sacked for criticizing EU lack of effort to prevent fraud.
    Hans-Martin Tillack, German reporter had his home raided as retaliation for exposing EU fraud.
    I don't know how they dare criticize Greece.

  • rate this

    Comment number 318.

    Samaras promised in his campaign to ask for changes to the measures being imposed on Greece in return for the loans. It will be interesting to see what he achieves when he has previously himself signed the earlier agreement.
    He will probably ask Merkel, 'Can I have some changes?' and she will say 'No', to which he will reply 'I know, but I had to ask because I promised I would.' Great leadership!

  • rate this

    Comment number 317.

    #316 PMK

    You are wrong here. I am not a supporter of your comrade Barroso. I just hate it when people come up with citations torn from their context, only to try to score a dubious debating point.

    So stop being pleased, look into your mirror, and see whether you are really want to be associated with your "comrade" Nigel Farage, who started all this questioning on Barroso's holidays.

  • rate this

    Comment number 316.

    #311 PMK

    I am pleased that in those trying times and the obvious failure of the cradle to the grave Socialist welfare state concept Comrade Barroso still has some supporters.

    Although I am much more pleased that the ship carrying Russian attack helicopters to Syria for homicidal Assad regime was forced to go back to putinesque Russia.

    [not that RT is going to report it]

  • Comment number 315.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 314.

    #311 PMK

    I'll continue the citation:

    ... Commission approved 10 million euros of Greek state aid for Latsis's shipping company – though the state aid decision had been taken by the previous European Commission before Barroso took up his post.

    and the footnote


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