Disaster averted

Uncertainty prevails in Europe after the Greek election

DEEPLY aware of how closely the world was watching, Antonis Samaras, leader of the centre-right New Democracy party which won the most seats in Greece's election on Sunday, exulted in ringing English that the result was "a victory for Europe".

Indeed, Athens has not had so much attention since the 2004 Olympics, when the country was riding high in the eyes of the international community. This time, however, the fixation was for all the wrong reasons. If the vote had swung further in favour of the refuseniks, Greece would probably have been squeezed out of the eurozone by sheer force of circumstance. Other countries would have declined to trade with or invest in it and people would have taken their money out, if not their bodies and souls. With the "pro-bailout" bloc in the lead, and likely to form a government, an immediate panic over a "Grexit", and its repercussions in and outside Europe, has been avoided.

The outcome, however, was not as clear as Samaras's celebratory words made it out to be. Both New Democracy and its extreme left-wing anti-austerity opponent, Syriza, did a bit better than in the stalemated election of May 6. Under the cosh of spending cuts, higher taxes and severe recession, the Greeks adjusted their political allegiances only slightly -- by just enough to give Samaras a majority in combination with Pasok, the socialist party that had made up the previous government, and whose popularity has thereby plummeted. The latter thinks that only the broadest coalition can take the country through the next few years of strain and sacrifice. If there is one thing that most Greeks can agree on, it is that the next government must extract a loosening of the stringent conditions attached to the bailout packages by the European Commission, International Monetary Fund and European Central Bank. Without the concessions, they will likely take to the streets again and repeat the instability that had precipitated the last round of elections.

A period of hard bargaining could ensue. The group of 17 eurozone countries remains "convinced that continued fiscal and structural reforms are Greece's best guarantee to overcome the current economic and social challenges". A growing number of non-Europeans, on the other hand, are starting to see austerity in the midst of recession as painfully counter-productive, and feel the country should be granted leeway to meet its obligations. While the debate continues, focus has already shifted back to the core issue of confidence in the euro. Next week's meeting of finance officials to discuss a European "banking union" will be the next most watched event after Greece.

Disaster averted

Uncertainty prevails in Europe after the Greek election

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