Greece’s Pro Bailout Party Wins (For Now)
Greece’s pro-bailout party has won closely (and nervously) watched parliamentary elections — likely causing sighs of relief in Europe, on Wall Street and, most assuredly, at the White House. But the big question is how long the stability will last. Even so, the by the center-right New Democracy party has short-circuited advance preparations to avoid European and American markets to go into crisis mode.
For now, at least..
The leader of Greece’s center-right, pro-bailout New Democracy party claimed “a victory for all Europe” after a first-place showing in Sunday’s parliamentary elections, promising that unpopular austerity measures “will bring the country back to prosperity.”
New Democracy’s Antonis Samaras now finds himself facing a new round of coalition talks, six weeks after a previous election that failed to produce a government. In a brief address following Sunday’s vote, he pledged to form a slate “determined to do what it takes and do it fast.”
“Today the Greek people expressed the will to stay anchored within the euro, remain in the eurozone and foster growth. This is a victory for all Europe,” Samaras said. “I call on all parties share those objectives to form a stable new government.
The bailouts that have kept Greece from defaulting on its debts in the face of an ongoing recession include widely unpopular budget cuts demanded by international lenders. Voters punished New Democracy and its former coalition partners in the socialist party Pasok in the earlier vote in May, but reopening the agreement would set up a confrontation with the other countries that use the euro — the common currency of 325 million people across 17 European nations.
With more than 94% of ballots counted, New Democracy had won nearly 30% of the vote, according to Interior Ministry figures. But that showing translates to 129 seats in the country’s 300-seat parliament, forcing it to seek other coalition members from the fragmented field.
New Democracy and Pasok have called for renegotiating the terms of their agreement with the country’s foreign creditors, known as the troika — the European Commission, the European Central Bank and the International Monetary Fund.
New Democracy also placed first in the elections on May 6, but failed to form a government with its former rivals, the Socialists. This time around, the parties do not have the luxury of squabbling over their differences and must form a coalition, however short-lived, because without foreign financing, Greece is expected to run out of money to meet expenses as soon as next month.
Any new leader will face an uphill battle to inject confidence into a paralyzed Greek economy that depends heavily on the continued infusion of money from the European Central Bank. The bank has become the last lifeline for a financial system that has all but seized up and a deficit-ridden government that has little ability to raise new revenues or borrow money to continue its operations.
Late Sunday night in Brussels, euro zone finance ministers said in a statement that they would help Greece transform its economy and that continued fiscal and structural reforms 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.
Antonis Samaras, the leader of the centre-right New Democracy beat off a challenge by the radical anti-austerity party Syriza and immediately promised that Greece would honour its commitments to pay off its debts and restore its public finances.
“I am relieved,” Mr Samaras said, after fears that the election of anti-austerity forces could have sent Greece crashing out of the euro.
“I am relieved for Greece and Europe. As soon as possible we will form a government.”
The German Government immediately signalled a willingness to soften the timing of Greece’s loan repayments and the harsh austerity commitments under its 240 billion euro bail-out agreements with the European Union and IMF.
Reuters reports that global markets are already reacting favorably:
The euro jumped to a one-month high and Asian shares rose on Monday after Greece’s cliffhanger election delivered a slim parliamentary majority to pro-bailout parties, a result seen as crucial to European leaders’ efforts to hold the euro together.
U.S. stock index futures and riskier commodities such as crude oil also rose, while gold fell after having gained for the past six sessions, when investors had looked to bullion as a safe haven amid fears the election could result in financial turmoil.
“There’ll be a definite sense of relief spreading around today,” said Masayuki Doshida, senior market analyst at Rakuten Securities. “The question is whether there will be a sustained rebound as there’s still so many things to sort out – the euro zone’s fiscal problems and Spanish banks.”
With around 97 percent of the vote counted, the Greek election looked set to deliver a government led by conservative New Democracy, heading a coalition broadly committed to a 130 billion euro EU/IMF bailout.
Financial markets had feared a victory for SYRIZA, the radical leftists opposed to the austerity package of job, wage and pension cuts that are a condition of the bailout, without which Greece would be bankrupt.
MSCI’s broadest index of Asia Pacific shares outside Japan rose 0.7 percent and Tokyo’s Nikkei share average opened up 1.8 percent. U.S. S&P 500 futures were trading around 0.5 percent higher.
The euro was up around 0.7 percent at about $1.2720, having climbed as far as $1.2748, its highest level in a month. The U.S. dollar index eased 0.4 percent.
U.S. crude rose 1 percent to around $84.85 a barrel and safe-haven assets retreated, with gold down 0.8 percent around $1,615 an ounce and benchmark U.S. Treasury 10-year yields rising to around 1.64 percent from about 1.586 percent.
So, it looks like New Democracy will at least be able to form a government, something that nobody was able to do after the last election just about six weeks ago, but how long that government will last is another question. Also left unanswered is how this new government will be able to enact the reforms to Greece’s fiscal policies that will be necessary to bring its debt problems under control, and that’s something that will have to be dealt with regardless of whether or not the Greeks stay in the Euro Zone.
Paul Krugman says little has really been settled and suggests that, in effect, this is delaying the inevitable catastrophe:
So they will now have the ability to continue pursuing an unworkable policy. Yay!
Joe Wiesenthal tells us that there’s a meme in Greece to the effect that Syriza didn’t really want to win, because it would rather see the current government flail some more. Conversely, establishment types should actually be dismayed by this outcome: if current policies fail completely, which seems almost a given, and Greece exits the euro anyway, which seems highly likely, the entire Greek center will end up discredited; better, in a way, to be able to blame the radicals.
And I gather I’m not the only one thinking along these lines; Business Insider also reports hints that Pasok, which has suffered terribly from its identification with failing policies, might not continue in the coalition unless Syriza is also brought on board — which then raises the question, why would Syriza do that?
The debacle rolls on.
Debacle-manufacturing isn’t unique to Greece, though. Earlier I was listening to Harvard’s Kenneth Rogoff–hardly a Share Our Wealth, Huey Long economist–urging the central banks of both Europe and the United States to “flood the markets with liquidity,” and here at home for the U.S. government to begin rebuilding our decayed and decaying infrastructure: roads, bridges, water systems, ports, all the material components of a modern civilization without which we cannot sustain ourselves, let alone grow economically.
And yet what are we doing? What is roughly half of Washington advocating? The Greek solution.
The debacles roll on.
It did not take long for Greece’s victory over Russia and qualification of the Euro2012 soccer championships on Saturday night to become a political issue.
Moments after the game, Greece coach Fernando Santos, who is from Portugal, was asked where comments by German Chancellor Angela Merkel about Greece needing to stick with austerity helped inspire his players ahead of the game.
The question produced a response from Santos that earned him plaudits from presenters on Greece’s state-run ET-1 channel and prompted numerous comments on social networks referring to the Portuguese as being “more Greek than the Greeks”.
“We are inspired by the history of Greece,” Santos told the Irish journalist who asked the question. “The Greek people have great pride in their history and this deserves people’s respect. Civilization, democracy and the sciences started in Greece. It is difficult for others to give us lessons.”
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