The Greek people are clearly angered by the economic crisis that has heaped austerity measures on them in return for external support to prevent the nation from sliding into bankruptcy. Their frustration with the two parties which have lead the nation between them for decades ended up in an indecisive election last month where both parties saw their support slashed and a left-wing alliance vehemently opposed to the austerity package emerge as a serious political force. In the event, no party could form a coalition government and a second general election had to be held.
Almost nobody in Greece wanted to see the country forced out of the Euro (except the Communist Party); even Syriza, the left-wing grouping. However, Greece’s EU partners and the European Commission had made it abundantly clear that reneging on the conditions for the two bailouts would lead to a Eurozone exit. Syriza seemed to believe that this was a bluff on the part of its partners, but this was probably a miscalculation.
The general election was held yesterday and the pro-bailout New Democracy emerged as the winner, however Syriza enjoyed the second largest share of the vote and the margin between the two parties was less than 3%. This reflects the fact that the nation is split in its views of the best way forward with many bitterly imposed to the austerity measures and the hardship that they feel accompanies them. New Democracy will seek coalition partners to attempt to form a government of national unity, but Syriza has already declined to be a part of it. It is likely that the new government will seek some concessions from its EU partners to soften the impact of austerity and to find a mechanism to drive up growth.
The result of the election has been welcomed by investors around the world with major markets and the Euro showing gains. The sovereign debt crisis is not over, but the Eurozone has stepped back from the edge with sanity prevailing in Greece. EU leaders now need to make concerted decisions backed up by actions to bring the crisis to a credible end.