Greek vote is a cause for relief but not rejoicing

June 19, 2012

By Hugo Dixon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Greek vote is cause for relief but not rejoicing. The Greeks have bought themselves a breathing space by voting for pro-bailout parties. But the resulting coalition may be weak, and the economy is still shrinking, and markets are still sceptical about the euro zone’s ability to find a comprehensive solution to the crisis.

Greece’s immediate challenge is to form a government. The centre-right New Democracy party, which came first, got only 129 out of 300 seats with 29.7 percent of the vote. Fortunately, the rest of the euro zone is piling on the pressure for a stable government to be formed fast, and that message seems to be getting through. The capacity of Greek politicians to wrangle shouldn’t be under-estimated. But the likelihood is that Antonis Samaras, New Democracy’s leader, will become prime minister, supported by the centre-left PASOK and the smaller pro-euro Democratic Left party.

Such a coalition could count on 179 MPs supported by nearly half the popular vote. But it wouldn’t be strong. Samaras isn’t a popular figure, even in his own party. He would need to bring the country back on the austerity path. And he would be harried all the way by the radical left SYRIZA party, which came a close second in the election and wants to tear up the bailout plan.

The rest of the euro zone will want to help Samaras by giving Greece extra time to hit its budget targets and by promising more investment. A rapid disbursement of the next tranches of bailout money, especially to complete the recapitalisation of banks, is possible. But the scope for help shouldn’t be exaggerated. Germany will not show leniency on the need for structural reforms, such as cracking down on tax evasion and slimming down the civil service. And any extra time (which of course means extra money) will be needed just to make up for the fact that the economy has worsened further during the months of electioneering.

The Greek problem could easily rear its ugly head again in a few months. With Spanish 10-year bond yields back above 7 percent and Italian ones over 6 percent early on June 18, the rest of the euro zone must brace for the shocks ahead.

One comment

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I am sorry to say but it is totally irrelevant what is happening in Greece.
It makes for good theatre but the situation is close to sitting at the bedside of a terminally ill patient, and when there is a flicker of the hands or face the family members become excited about possible recovery or healing, while the true diseases keeps eating the patient from the inside as no proper diagnosis or cure was established.
The problem we are facing is a global problem.
Our whole way of life, the constant quantitative growth economic model, and the political establishment serving it has driven us into a dead end since it was always unnatural and unsustainable, and now the whole structure started to become self destructive.
We behave like cancer in this global, interconnected and interdependent human network with our insatiable appetite for more, way above necessities and means, alway gaining at the expense of others, climbing higher by trampling over the rest and the environment around us.
Now there is nowhere else to go, but we still try stubbornly adjusting, restricting or stimulating without any true purpose, simply waiting for the miracle of “return to growth”.
Until we honestly start examining ourselves why we are where we are and what our conditions are in this new reality, we will keep sliding closer and closer to the edge.

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