Monday June 18, 2012

ATHENS, Greece -- Fears of an imminent Greek exit from Europe’s joint currency receded Sunday after the conservative New Democracy party came first in a critical election and pro-bailout parties won enough seats to form a joint government.

As central banks stood ready to intervene in case of financial turmoil, Greece held its second national election in six weeks after an inconclusive ballot on May 6 and the subsequent collapse of coalition talks.

With one party advocating ripping up Greece’s multibillion-euro bailout deal, Sunday’s election was seen as a vote on whether Greece should stay in the 17-nation group sharing the euro currency. A Greek exit would have had potentially catastrophic consequences for other ailing European nations, the United States and the entire global economy.

The United States welcomed the result. "We hope this election will lead quickly to the formation of a new government that can make timely progress on the economic challenges facing the Greek people," the White House said in a statement.

Near complete results showed New Democracy coming first with 29.6 percent of the vote and 129 of the 300 seats in Parliament. The radical left anti-bailout Syriza party had 26.9 percent and 71 seats and the pro-bailout Socialist PASOK party came in third with 12.3 percent of the vote and 33 seats. The extremist far-right Golden Dawn party had steady support, getting 6.9 percent of the vote and 18 seats.

Sunday’s results "will probably ease fears of an imminent Greek euro exit," said Martin Koehring of the Economist Intelligence Unit. "There will probably be a relief rally tomorrow in the financial markets. But the key question is how quickly can a government be formed?"

Stock analysts, however, warned that any bounce for financial markets could be short-lived.

"Treat knee-jerk market rallies with caution," Neil MacKinnon, a global macro strategist at VTB Capital, advised clients, saying there was still too many questions about Europe’s debt crisis to celebrate the Greek vote.

Greece’s parties have starkly different views about what to do about the $300 billion in bailout loans that Greece has been given by other European countries and the International Monetary Fund, and the harsh austerity measures that previous Greek governments had to accept in return for the loans.

With none winning an outright majority, the parties will have to seek coalition partners to form a viable government, needing a simple majority of at least 151 seats. New Democracy will get the first stab at brokering a partnership on Monday.

Negotiations could be tough. PASOK leader Evangelos Venizelos, who spent months negotiating bailouts as Greece’s finance minister, has suggested dumping the usual procedure of each party seeking coalition partners. He said a government must be formed quickly and suggested a four-party coalition between New Democracy, Syriza, PASOK and the small Democratic Left, which was in sixth place with 6.3 percent of the vote and 17 seats.

"There is not one day to lose. There is no room for party games. If we want Greece to really remain in the euro and get out of the crisis to the benefit of every Greek family, it must have a government tomorrow," Venizelos said.