Euro safe for now as Greece backs bailout

 
Tim Wallace
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K politicians looked set to form a pro-bailout government with a very narrow majority last night, after a close run election gave no party a sizeable lead.

The backing for the bailout programme could lead the Eurozone to give additional aid to the country, as the parties in line to form a coalition have shown commitment to austerity and economic reforms.

Pro-bailout conservatives New Democracy came top with 29.5 per cent of the vote, according to official projections last night, while anti-bailout radical leftists Syriza came in second with 27.1 per cent.

Pasok, the socialist former ruling party, came third on 12.3 per cent. It also supports the bailout.

That means New Democracy receives the additional 50 seat bonus given to the top party, allowing it to pair up with Pasok to take 161 seats in the 300-strong parliament. Syriza, meanwhile, takes approximately 75 seats in Greece’s second election within six weeks.

New Democracy leader Antonis Samaras called yesterday for a “salvation government” to continue with the bailout programme and “bring the country back to prosperity”.

Pasok leader and former finance minister Evangelos Venizelos also called for a coalition with the top three parties taking part.

But Syriza’s Alexis Tsipras said he intends to stay in opposition, and will not join a pro-bailout grouping.

German foreign minister Guido Westerwelle signalled that Greece could gain some concessions from the troika on the painful bailout programme, though nothing like the full-scale renegotiation sought by Syriza.

“There can’t be substantial changes to the agreements but I can imagine that we would talk about the time axes once again,” Westerwelle said last night. “But there is no way out of the reforms. Greece must stick to what has been agreed.”

Germany’s Chancellor Angela Merkel called Samaras to congratulate him last night, but said she expected Greece to meet its obligations.

SEB’s chief economist Robert Bergqvist told City A.M. the results could mean cheaper emergency loans for the state. “This means the government is likely to receive the next tranche of its bailout next month, so it will not run out of money,” he said.

“The government will have to continue with austerity measures, but it is probably going to benefit from some kind of renegotiation on interest rates and the maturities on the debt.”

The International Monetary Fund, one of the three bodies responsible for Greece’s bailout, said it will “stand ready to engage with the new government” to restore financial stability.

The Eurogroup of finance ministers said the election “should allow for the formation of a government that will carry the support of the electorate to bring Greece back on a path of sustainable growth”.

The euro jumped to a one-month high against the dollar after the results of the vote were published.