Samaras Attempts To Build A Coalition Government

Greece’s New Democracy party has begun talks to build a coalition government after winning over Syriza in the country’s second general election in six weeks.

Antonis Samaras, its leader, received today a mandate to form a government from President Karolos Papouilias. His challenge is to try to rebuild credibility with Greece’s European partners to secure further bailout funds.

However, coalition talks may not be easy. After a first, inconclusive election six weeks ago, each of the main parties tried but failed to form a coalition government.

European officials indicated a willingness to ease the terms of rescue package as long as Greece re-commits as soon as possible to their austerity demands. They have warned that if a new Greek government rejected the bailout terms, the country could be forced to abandon the single currency.

The election in Greece was about a choice between open-ended austerity to stay in the euro or reject the terms of a bailout and risk the turmoil of exiting the union.

New Democracy, supporting the austerity demands, won 129 seats, enough to put together a coalition with Pasok. New Democracy and Pasok would have 162 seats if they agree to govern together in the 300-member parliament, according to Interior Ministry projections based on 99 percent of yesterday’s votes counted.

The addition of Democratic Left, which has demanded commitment to staying in the euro as well as “gradual disengagement” from the austerity measures, would give a government 179 seats.
Tsipras, head of Syriza, indicated his party would remain in opposition.

For markets, a majority for an New Demo Democracy-Pasok coalition would be a relief reducing the risk of a Greek euro exit.

Greek turmoil started back in October 2009, when Pasok Prime Minister George Papandreou revealed a deficit four times more than European rules allowed. The country, which is in its fifth year of recession, has since received two rescue packages totaling 240 billion euros from the European Union and International Monetary Fund.

Source: Bloomberg

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Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.