As we noted yesterday, the weekend also saw an election in Greece. Whilst the major parties which formed the coalition government took a hammering, no clear winner has emerged and that leaves Greece rudderless as another European sovereign debt storm looms. Like the first storm which ultimately led to the first of Greece’s to IMF/EU bailouts, this could be said to be of their own making.
On Sunday, support for the New Democracy (ND) party (centre right) fell from 33.5 to 18.9% whilst socialist Pasok’s support melted-down from 43 to just over 13%. These two parties have ruled Greece since the 1970s. The result is that even together, these two parties fail to reach a majority in parliament – by 2 seats. An extreme right-wing party, Golden Dawn, won 7% of the vote and holds 21 seats in the 300 seat parliament.
The leaders of ND have failed to achieve enough support for a coalition government and so the baton has passed to Syriza, a radical left wing group. Their leader claims to have been given a clear mandate by the people to “tear-up” the bailout agreements and the austerity measures that came with it. Since the idea of putting a second bailout to a referendum cost then Greek PM Georges Papandreou his job and provoked a fairly angry response from her EU partners, any move to renege on bailout deals which were binding on Greece and its future parliaments is certain to go down like a lead balloon.
In the event, this may be moot since the left block would need mainstream support to form a government and that seems out of the question. If that happens, Pasok would be offered their chance to see if a deal can be struck.
Whilst the idea of abandoning austerity measures and tearing up agreements that stopped the nation from falling into a financial black hole is obviously quite appealing, it has about as little chance of success as you telling the bank that you no longer feel like paying your mortgage, but expect to continue living in your palatial home!
Greece will be contributing to a further round of Euro jitters which will see the single currency dip and markets give up some of their recent gains. Ultimately, it will not alter the course of the juggernaut since the Greek tail cannot be allowed to wag the Euro dog any longer. If the Greeks insist on a financial suicide pact and a leading place in the pantheon of third world countries, their EU partners won’t try too hard to dissuade them. Enough is enough.