Greek Pro-Bailout Parties Take Majority, Projection Shows

By Maria Petrakis and Natalie Weeks - Jun 18, 2012 3:28 AM GMT+0700

Greece’s largest pro-bailout parties, New Democracy and Pasok, won enough seats to forge a parliamentary majority, official projections showed, easing concern the country was headed toward an imminent exit from the euro. The currency rose on the result.

The election would give New Democracy and Pasok 163 seats if they agree to govern together in the 300-member parliament, according to the official projection by the Interior Ministry in Athens based on 63 percent of today’s vote.

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Alexis Tsipras, leader of Greece's Syriza party, arrives to cast his vote in the second round of the Greek general elections, in Athens. Tsipras told supporters to “turn your backs on the two parties of bankruptcy,” urging them to reject the two main parties. Photographer: Chris Ratcliffe/Bloomberg

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Greeks head to the ballot box in two days for a contest that may determine the fate of the world's first democracy and the future of the newest reserve currency, while roiling markets from Wellington to Wall Street. Photographer: Chris Ratcliffe/Bloomberg

“For markets, a majority for an ND-Pasok coalition would be a relief,” Holger Schmieding, London-based chief economist at Berenberg Bank, said in a note today. “It would very much reduce the risk of a Greek euro exit.”

The vote forced Greeks, in a fifth year of recession, to choose open-ended austerity to stay in the euro or reject the terms of a bailout and risk the turmoil of exiting the 17-nation currency. The election threatened to dominate a summit of world leaders that starts tomorrow in Mexico.

Antonis Samaras’s New Democracy had 30.1 percent, or 130 seats, and Socialist Pasok took 12.6 percent for 33 seats, the projection showed. Alexis Tsipras’s Syriza, which advocated reneging on the terms of the bailout, won 26.5 percent, or 71 seats. Samaras called for a government of national salvation.

“The Greek people expressed their will to stay anchored with the euro, remain an integral part of the euro zone and honor the country’s commitments,” Samaras told supporters. “There’s no time to lose.”

Pressure on Venizelos

While Pasok leader Evangelos Venizelos demanded that Syriza join a unity coalition, the former finance minister said a government must be formed right away to avoid further economic deterioration and safeguard Greece’s place in the euro. That will make it harder for him to hold off demands to team up with Samaras in a coalition that excludes Tsipras.

Pasok “will not be able to resist such a pressure,” Wolfango Piccoli, a political risk analyst at Eurasia Group in London, said in an e-mail.

While 21 parties were on the ballot, the main contest was between Tsipras and Samaras, who said his challenger’s policy risked an exit from the currency union.

Tsipras signaled Syriza won’t join the national salvation government planned by New Democracy.

Syriza “will be present in all developments as the main voice of the anti-bailout vote in Greece,” he said in statements carried live on state-run NET TV today. Austerity measures underpinning the international rescues extended to Greece have no popular support, he said.

Euro Concerns

The election marked a revote after an inconclusive May 6 ballot that stoked increasing speculation that Greece’s dwindling cash reserves and accelerating deposit flight would force it out of the 17-nation currency union.

Now in its third year, the European debt crisis has rounded back to Greece, which sparked the turmoil in October 2009 when Pasok Prime Minister George Papandreou revealed a deficit four times more than European rules allowed. Greece has since gotten two rescue packages totaling 240 billion euros ($303 billion) from the European Union and International Monetary Fund.

In exchange for the aid, Greece promised state asset sales, pension cuts and wage reductions. Tsipras pledged to abandon those measures. Samaras had said that made the vote a referendum on quitting the euro. Tsipras, who said he’d try to keep Greece in the euro while tearing up the bailout agreements, urged voters to reject the two main parties that backed the international rescue, New Democracy and Pasok.

German Signal

Meantime, Germany signaled a willingness to loosen some of the pressure on Greece. “I can imagine we could do something in terms of the timeframe, because the standstill that has taken place over the past few weeks has done damage,” Foreign Minister Guido Westerwelle told broadcaster ZDF in Berlin today. “But one thing must be clear: the treaties must be valid in substance. They can’t be canceled or renegotiated.”

Before the vote, central banks intensified warnings that Europe’s failure to tame its debt crisis threatens to roil the world’s financial markets and economy as Greece’s election looms as the next flashpoint for investors.

The Greek turmoil has cast a pall around the world, with Bank of England Governor Mervyn King calling the euro debt crisis a “black cloud” over the global economy.

Following the vote, the currency gained 0.6 percent to $1.2709 at 11:20 p.m. in Athens.

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net