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Greek election impasse heralds lengthy instability

By Nicholas Paphitis

Associated Press

Published: Monday, May 7 2012 6:33 a.m. MDT

An extreme far-right Golden Dawn party's supporter holds a flare during the elections results in the northern Greek port city of Thessaloniki, Sunday, May 6, 2012. Golden Dawn, which has vowed to kick out immigrants and mine Greece's borders with Turkey, was predicted to win between 6.5-7.5 percent, well above the 3 percent needed to enter parliament.

Nikolas Giakoumidis, Associated Press

ATHENS, Greece — Bailout-reliant Greece faces weeks of financial turmoil after voters angry at crippling income cuts punished mainstream politicians, let a far-right extremist group into Parliament and gave no party enough votes to govern alone.

The one certainty coming out of Sunday's election was that parties backing the draconian international rescue package lost their majority in parliament — raising the chances of a possible Greek exit from the common euro currency.

The uncertainty weighed on markets across Europe, with the Athens exchange tumbling 7.3 percent in midday trading.

Official results showed conservative New Democracy came first with 18.85 percent and 108 of Parliament's 300 seats. Party leader Antonis Samaras, who backs Greece's bailout commitments for austerity but has called for some changes to the bailout plan, will launch coalition-forming talks later in the day.

"I understand the rage of the people, but our party will not leave Greece ungoverned," Samaras said after Sunday's vote.

After receiving the mandate to start negotiations from President Karolos Papoulias, Samaras will have three days to strike a coalition deal. But that could prove impossible because even with the support of the only other clearly pro-bailout party elected, Socialist PASOK, New Democracy would fall two seats short of a governing majority.

If the deadlock does not ease, Greece faces new elections under a caretaker government in mid-June, about the time it has to detail new drastic austerity measures worth €14.5 billion ($19 billion) for 2013-14.

In June, Athens is also due to receive a €30 billion ($39.4 billion) installment of its rescue loans from the other countries in the 17-strong eurozone and the International Monetary Fund.

Analyst Vangelis Agapitos said protracted instability would threaten the country's eurozone membership. Greece's debt inspectors — the eurozone, IMF and European Central Bank, collectively known as the troika — could turn the screws by halting release of the bailout funds until Athens moves forward with its pledged reforms.

"Europe can live without Greece but I don't think Greece can live without Europe," he said. "If the troika is bluffing, Greece will remain in the euro. But if the troika says: 'I can negotiate, but first show me some progress,' Greece has no progress to display right now."

"If the troika rattles our bars, then either the people will come to their senses at the next elections or the country will enter an alternative course, and when we open that door we will see what kind of chaos — or paradise — lies behind," Agapitos said.

Sunday's big winner was the anti-bailout Radical Left Coalition, or Syriza, whose unprecedented second place with 16.78 percent gives it 52 seats.

Disaffected voters deserted PASOK and New Democracy, the two mainstays of Greek politics, leaving them at their worst level since 1974, when Greece emerged from a seven-year dictatorship. Instead, strong gains were registered by smaller parties, including the extremist Golden Dawn, which rejects the neo-Nazi label and insists it is nationalist and patriotic.

Golden Dawn has been blamed for violent attacks on immigrants and ran on an anti-immigrant platform, vowing to "clean up" Greece and calling for land mines to be planted along the borders. It got 6.97 percent of the vote — a stunning improvement from 0.29 percent in 2009 — and won 21 seats.

The election was Greeks' moment to vent their fury over two years of austerity that Athens has been pushing through to qualify for bailout loans. Incomes, benefits and pensions have been slashed repeatedly and taxes hiked. Unemployment has soared to a record of over 21 percent.

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