Greek Conservatives Projected to Win Election

The parties that want to keeping Greece in the euro win a majority in the election.

Exit polls suggest that Greece’s main conservative party will narrowly win Sunday’s parliamentary election which would alleviate concern, at least for the time being, about the country leaving the euro.

If the conservative New Democracy party comes out the strongest, it will pick up an additional fifty seats in parliament. It is projected win some 40 percent of the vote in combination with the socialist Pasok party which would enable them to form a government that respects the conditions of Greece’s international bailout agreements.

The far-left Syriza party, which was neck in neck with the conservatives before Sunday’s vote, had vowed to tear up the terms of the bailouts and cancel the austerity measures that were implemented by the previous coalition governments. It came in second place.

Greece received €110 billion in financial assistance from other European countries and the International Monetary Fund in 2010 and another €130 billion in February. It has had to cut back on pensions and public spending, raise taxes and liberalize sectors of its economy to qualify for bailout money.

European leaders, including newly-elected socialist French president François Hollande, had warned in recent days that unless Greece respected the terms of its latest bailout, it could be made to leave the currency union. Syriza leader Alexis Tsipras dismissed these warnings as bluff.

The latest tranche in European and international financial support is due later this month. If Greece does not advance its program of fiscal consolidation and market reforms, the European Union and the IMF could withhold bailout funds which would push Greece into bankruptcy in a matter of days or weeks.

Sunday’s vote was necessary after elections in May failed to produce a government. New Democracy and Pasok, which have ruled Greece in alternation since democracy was restored in 1974 and are committed to respecting the conditions of the bailouts, fell short of a majority at the time and couldn’t convince smaller parties to join them in a coalition.

In anticipation of Sunday’s election results, Greeks were pulling their money out of banks en masse. Some €800 million was leaving Greek banks on a daily basis. This has put mounting pressure on the central banks of other European countries, particularly the German Bundesbank, because it has to effectively loan to Greek banks if Greek savers transfer their money to German accounts. Already, Greek banks “owe” the Germans more than €100 billion.

In the real economy, too, time is running out. Russian oil and gas company Gazprom has threatened to cut off gas supplies because Greece is behind on its payments. Its state-owned health insurer hasn’t paid pharmacists for months. Large German and French insurance companies have announced that they will no longer cover exporters shipping goods to Greece. The country’s shipbuilding industry, once highly competitive, has a 90 percent unemployment rate.

In the German parliament, there have been discussions about a third bailout for Greece already but patience is wearing thin. The liberalizations and privatizations that Greece has promised have not been forthcoming. Spending has been cut and taxes have been raised but the measures that are designed to make the economy more competitive and reduce unemployment remain largely stalled in the Greek bureaucracy.