Winner of Greek elections moves to form government that will embrace bailout

The winner of the Greek elections moved on Monday to build a governing coalition for this fractured state, as rising Spanish interest rates offered a stark reminder that the worst may still not be over for the euro zone.

Antonis Samaras, whose New Democracy party garnered about 30 percent of the vote in Sunday’s parliamentary ballot, was urged by President Karolos Papoulias to form a government quickly to respond to the country’s economic crisis and start to repair frayed relations with international bailout lenders.

“The country cannot stay not even one hour without a government,” Papoulias said after presenting Samaras with a mandate that will give him several days to form a new coalition. Samaras was given a similar mandate after a May 6 vote, but the outcome of that election was so divided neither he or other top finishers were able to form a government.

Final results in this round of voting gave Samaras’ party 129 seats in the Greece’s 300-person assembly. A possible alliance with the Panhellenic Socialist Movement would be enough to form a majority, and talks were expected to proceed Monday afternoon.

The two parties are rivals, but both have endorsed the bailout package that is keeping Greece afloat, with hundreds of billions of dollars in international loans given in return for a strict set of budget cuts and other economic steps.

The second-place Syriza party, which opposes the bailout terms and had threatened to tear up the agreement and possibly lead Greece away from the euro zone, has said it will not join the government.

A decision by Greece to leave the currency union could set off dangerous ripple effects with investors suspecting that other struggling European countries, such as Italy and Spain, also might not be able to meet their obligations. The result could have been a series of domino-like exits from the euro zone, ultimately causing the disbanding of the currency union and economic chaos.

Instead, the election outcome initially boosted European stocks, and prompted conciliatory statements from European leaders indicating they may be willing to ease some of the terms of the bailout package, given pledges by Samaras to control government deficits and restructure the economy.

In a short victory speech, Samaras called the outcome a “victory for all Europe.”

“Today the Greek people expressed the will to stay anchored within Europe, honor their commitments and foster growth,” Samaras said. He called on the other parties to “join forces to form a stable government. . . . There’s no time to lose.”

But the risks still facing the euro zone became quickly apparent as the interest rate on Spanish bonds traded in the secondary market breached 7 percent. That level has proven to be a red line for smaller nations, including Greece, who sought international help after reaching it.

Spain’s larger economy may not be as quickly susceptible, but the jump in borrowing costs reflected the major decisions still facing the euro zone as a whole: how to strengthen the region’s banks, restart economic growth, and convince investors that the currency union is durable.

Greece’s economic plight and Europe’s broader problems have become one of the chief risks to the world economy, and will be a focus of talks when President Obama and other Group of 20 leaders meet in Mexico this week. Europe’s troubles already are buffeting the U.S. economy, making them a matter of immediate concern for Obama’s reelection efforts.

Syriza leader Alexis Tsipras said he had called Samaras to congratulate him but would be an aggressive opposition leader. The austerity demands of the bailout “are not sustainable, and the government with New Democracy as a core should take this into account,” Tsipras said.

Previous vote inconclusive

At the polls Sunday, both New Democracy and Syriza increased their share of the vote from the previous contest. New Democracy took around 30 percent of the national tally and Syriza about 27 percent.

The coming days will see Samaras bargain with the country’s other parties, most notably the Panhellenic Socialist Movement, or Pasok. The Socialist party has alternated power with New Democracy throughout Greece’s modern history but crashed in the May election in the face of Syriza’s rise as a protest against the economic program that Pasok’s leaders negotiated with the IMF.

Pasok finished third Sunday. It won enough seats that if it joined with New Democracy, Samaras would be able to form a pro-bailout government. But in earlier statements, Pasok officials said they would not enter a coalition unless it was part of a larger national unity government that included Syriza. That scenario is unlikely, given Syriza’s anti-bailout stance.

Nation is divided

The strong showing Sunday by Syriza — 25 percent of the vote is substantial in Greece’s divided politics — was a sign of how ambivalent Greeks remain about the bailout. The nation is deeply divided over whether the emergency loans are worth the strict conditions imposed by the IMF and the European countries putting up the money.

But Greek voters were not ready to risk wholesale change — and, under Tsipras, a possible clash with Europe and exit from the euro zone.

Samaras, a Harvard-trained MBA, endorsed bailout efforts for Greece while he was an opposition leader in recent years.

He is considered by the IMF and other European nations to be a constructive partner in upcoming talks about the future of the program.

A Samaras-led government could also include the smaller Democratic Left party, strengthening his ability to pass legislation and take other steps required under the detailed memorandum signed by the Greek government just a few weeks ago in return for international loans.

Rescue plan running behind

Once a government is formed, the new prime minister will open talks with the IMF, the European Commission and the European Central Bank to restore the flow of international bailout funds needed to keep Greece’s government and banking system afloat. Over several weeks of political stalemate, the country’s financial rescue plan has slipped behind schedule, and international officials are likely to want fresh commitments from the Greek government.

But there will be demands from Greece as well. Samaras has said he will ask to slow the timetable of budget cuts and other changes expected under the bailout program.

At polling places in well-to-do neighborhoods in the shadow of the Parthenon and in working-class enclaves, voters shared a frustration over the country’s circumstances and said they hoped the election would ease conditions regardless of the outcome.

“We’ve lost our dignity,” said 58-year-old Kostas Lazaridis, a Syriza supporter, as he thumbed a set of worry beads outside the graffiti-covered High School Number 12 in the capital’s Kato Petralona neighborhood. “Change should not be radical, but it is crucial. We have to put a stop to this.”

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