Greek political earthquake rattles eurozone

Greece faced an uncertain future on Monday after a stunning election shake-up by parties opposed to further vital austerity cuts, sending shockwaves through markets on fears of renewed eurozone turmoil.

The two mainstream parties fell short of an absolute majority in parliament with their share of the vote collapsing to 32.1 per cent, compared to 77.4 per cent in the 2009 election, making it unclear how a new government will be formed.

Instead, voters angry after two years of cuts handed parties opposed to the terms of Greece's two international bailouts a stunning result -- a total of 151 parliamentary seats between them, based on 99 per cent of votes counted.

Neo-Nazi party Golden Dawn was set to enter parliament for the first time since the end of the military junta in 1974, with 21 seats in the 300-seat chamber.
The election's nominal victor, New Democracy leader Antonis Samaras, nevertheless said he would try to piece together a "national salvation government" committed to the euro but with easier bailout terms.

"May the God of Greece help us," Pasok leader Evangelos Venizelos said late Sunday as he called for the formation of a "national unity government" among pro-European parties.

The centre-left Ta Nea newspaper called the task of forming a government "a nightmare of impossibility."

The shape of a new government "looks very unclear, to put it mildly," said Berenberg Bank economist Holger Schmieding, with a "risk that Europe could turn off the flow of support funds and thus force Greece to leave the euro."

Despite Europe's "anti-contagion defences" and the European Central Bank potentially shielding other periphery eurzone members from the effects of a Greek exit, the "risk of substantial market turbulence is significant," he said.

Greece's stock market plunged 8.3 per cent. The country, in its fifth year of recession with unemployment at 20 per cent, is committed to finding in June another 11.5 billion euros ($15 billion) in savings over the next two years.
Stocks on the DAX index in eurozone paymaster Germany were down 1.3 per cent while France's stock market slid 1.1 per cent. The euro fell to its lowest level since late January before recovering some ground.

The possibility now looms of fresh elections, as left-wing Pasok and New Democracy, which formed the outgoing coalition led by technocrat Prime Minister Lucas Papademos, will not have a legislative majority.

Pasok, which along with New Democracy has dominated Greek politics for nearly four decades, was even relegated to third place by the leftist Syriza, which more than tripled its share of the vote from 2009 to 16.7 percent.

"The parties that signed the memorandum (with the EU and the IMF) are now a minority. The public verdict has de-legitimised them," Syriza head Alexis Tsipras said late Sunday, calling the election a "message of overthrow".

The only possible partner for ND and Pasok, offering a glimmer of hope, is the Democratic Left, a Europhile new leftist party, with 19 seats in the new-look chamber.

But comments late Sunday from party leader Fotis Kouvelis did not create much hope: "We are not going to contribute to sticking with policies that impoverish the people and society ... We will keep our promises."

Independent Greeks, a new right-wing party set up by New Democracy defector Panos Kammenos, is slated to become the fourth-biggest party with 33 seats followed by the communist KKE with 26 lawmakers.

Both Pasok and ND have said they want the "troika" of the European Union, International Monetary Fund and European Central Bank to cut Greece more slack in their two bailout deals worth 240 billion euros.

But with voters angry at the painful austerity cuts demanded in response, the other parties want to tear up the agreements.

The communist KKE party wants to leave the eurozone and the neo-Nazis say they want to stop servicing Greece's debts, an aim shared by Kammenos who advocates turning to Russia to prop up the country.

Panayotis Petrakis, economics professor at Athens University, expressed hope however that new French president-elect Francois Hollande "would prevent Europe treating us too harshly. There is still a little room for manoeuvre."

This was also a source of hope for voter Nadia Semouiliana, an engineer, who told AFP in central Athens: "Maybe now with the French elections this is a new day for all of Europe."
 
 

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