Three-Party Coalition Likely After Greek Election

Conservatives and socialists will try to form a government with the Democratic Left.

Greece’s main conservative and socialist parties are expected to form a coalition with the small Democratic Left after a critical election on Sunday delivered a victory but not a majority for Antonis Samaras’ right-wing New Democracy party.

The Democratic Left, pro-European but opposed to the austerity measures that have been tied to Greece’s two international bailouts, refused to enter a coalition with New Democracy and the socialist Pasok after the previous parliamentary election in May. New Democracy and Pasok, which have ruled Greece in alternation since democracy was restored in 1974, fell two seats short of a majority at the time. Even if they command a majority in parliament today, the inclusion of a third party is desired to give the new government a sense of national unity.

All three parties seek to renegotiate the terms of the financial support that Greece has received from its European partners but unlike the far-left Syriza, which had been neck in neck with New Democracy in preelection polls, they will not simply tear up the conditions of the bailouts and risk a sovereign default.

Without help, Greece could struggle to make payments as early as later this month when the latest tranche in bailout funds from other European countries and the International Monetary Fund is due. If Greece does not advance its program of fiscal consolidation and market reforms, European leaders warn that they will withhold support.

“The new government must stick to its commitments, which the country has agreed on,” German chancellor Angela Merkel insisted at a meeting of G20 nations in Mexico on Tuesday. Athens may get more time to repay its loans though, something Samaras, who will likely be prime minister, has called for.

Greece received €110 billion in financial assistance from other European countries and the IMF 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.

Samaras, who fiercely criticized the first Greek rescue package when his party was in opposition in 2010, grudgingly accepted the terms of the bailout in November of last year when he backed an interim government that was headed by former central bank governor Lucas Papademos. He has since promised to cut taxes and raise pensions and unemployment benefits to boost economic growth.

A New Democracy official told the Reuters news agency on that the new government would aim to accelerate and broaden the privatization program to raise revenue but also ask its creditors to spread nearly €12 billion of further budget cuts over four years instead of two.