Relief was felt in Brussels and Berlin on Sunday, after the pro-bailous New Democracy Party won the repeated parliamentary elections in Greece. This means Greece will not going to leave the euro zone, upending the world economy in its wake. However, stability in the country is not going to be achieved so easily.
On Sunday, New Democracy won 29.7% of the votes, while its main competitor, SYRIZA won 26.9%. Parties on the left side of the political scale, the Communist Party of Greece and the Democratic Left, won 4.5% and 6.2% respectively. Right-wing, anti-austerity parties Independent Greeks had 7.5%, while radically right party Golden Dawn won 6.9%.
The elections can be considered favorable for the EU and the previously agreed austerity package. However, Antonis Samaras, the leader of New Democracy has a difficult task in front of him: to form a convincing coalition. Greek President, Karolos Papoulias, gave three days to Samaras to form a working coalition. Immediately after elections, Samaras said that there is no time to lose, and urged for a “national consensus,” and immediate forming of the government.
Samaras expressed his belief that a wide consensus must be reached for the country to find its path out of the crisis. Moreover, he said that he will ask for new negotiations concerning the austerity deal. Market response to the polls and these announcemnets were mixed on Monday.
German Chancellor Angela Merkel said that election cannot call into question the commitments Greece made and that negotiation on the reform steps previously agreed on is unacceptable. Greece has agreed to:
- 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 300 million euros this year
- Spending cuts of more than 3 billion euros this year
- Liberalize labor laws to make hiring and firing easier
- Boost tax collection
- Carry out privatisations worth 15 billiob euros by 2015
- Open up more professions to competition, like in health, tourism, and real estate
- Greece aims to cut its debt burden to 116% of GDP by 2020.
The main question remains who is going to form a governing coalition with New Democracy? There are four possible post-election scenarios at the moment. The first one is that New Democracy will join forces with the Panhellenic Social Movement and form a strong coalition. The second one will be moderate coalition with Democratic Left. The third option for New Democracy would be to form a government with Independent Greeks. The last of the scenarios, so far only theoretical, is that New Democracy will be helped by the radical Golden Dawn.
The best possible option for the Greeks now would be a pro-european coalition of New Democracy, Panhellenic Social Movement and Democratic left. If all three parties participate, the governing coalition would have a comfortable majority of 179 seats in the 300-seat parliament. New Democracy would take 130 seats, thanks to a 50-seat bonus for the winning party, PASOK 33 and the Democratic Left 16 seats.
However, one thing is sure: whichever party enters the government, its popularity will suffer because of the tough austerity measures that Greece has to implement. Voting was the easiest part of the mission they have to undertake. Bringing the country back to positive economic balance, and securing social stability in the process, is the difficult one.