Angry Greek Voters Could Push the Country — and the Continent — Back into a Deep Financial Crisis

Angry Greeks Vote in Cliffhanger Election

May 6, 2012

Reuters - Greeks enraged by economic hardship voted on Sunday in a deeply uncertain election that could reignite Europe's debt crisis and throw into doubt the country's future in the euro zone.

At stake in the first general election since Greece detonated a wider European crisis at the end of 2009 is whether it will stick to the terms of a deeply unpopular EU/IMF bailout or start down a path that could take it out of the euro.

Leaders from all sides emphasized the importance of the vote - which pollsters say is impossible to call - for the future of Greece, now suffering one of the worst recessions in postwar Europe.

"We all agree that these elections are perhaps the most crucial and today each of us is deciding not only who will govern the country but also Greece's path for the next decades," said outgoing technocrat Prime Minister Lucas Papademos, as he cast his vote in Athens.

Opinion polls indicate voters hit by record unemployment, collapsing businesses and steep wage cuts will send to parliament an unprecedented number of small parties opposed to austerity and punish New Democracy and Socialist PASOK - the two parties who have ruled Greece for decades.

They are the only major forces backing the bailouts that fended off bankruptcy but caused deep hardship.

The prospect that New Democracy and PASOK will fail to win enough votes for a coalition government, despite finishing first and second, has raised the risk of a prolonged period of uncertainty as they seek allies from anti-bailout parties.

But Papademos said he thought a new government would be formed this week.

International lenders and investors fear success for up to seven small parties opposed to the bailout could lead to Greece reneging on the bailout terms, dragging the euro zone back into the worst crisis since its creation.

Many voters flinched and turned their head away at a polling station in the southern Athens suburb of Ilioupoli when asked if they had voted for one of the big pro-bailout parties.

"WE ARE ALREADY BANKRUPT"

Some shrugged off threats that Greece will go bankrupt if it abandons the bailout.

"I don't think that voting for a small party will make us go bankrupt. We already are," said 53 year-old Panagiotis, a craftsman, after voting for the conservative Independent Greeks.

Euro zone paymaster Germany has warned there would be "consequences" to an anti-bailout vote and the EU and IMF insist whoever wins the election must stick to austerity if they want to receive the aid that keeps Greece afloat.

PASOK leader Evangelos Venizelos said the vote was the most crucial since the end of a military dictatorship in 1974.

"We very much hope that the people will judge with a historic conscience, having considered everything calmly, with common sense and with hope and optimism for the future," he said at a polling station in Greece's second city of Thessaloniki.

But Alexis Tsipras, Greece's youngest political leader and head of the small Left Coalition, told reporters:

"We are certain that the people will send a message to all of Europe for a change of course. There is no place for the barbarity of bailouts in our common European path and we are certain that the Greek people will turn the page."

Polling stations opened at 7 a.m. (0400 GMT) and will close at 7 p.m., with many voters deciding at the last minute.

The first indication of the result is expected in exit polls immediately after voting stations close, but it could take many more hours to get the final outcome or even a clear picture under a complex electoral system that gives a 50-seat bonus to the first party.

TOO CLOSE TO CALL

Pollsters say this is the most unpredictable election in decades, as the traditional left-right divide has given way to pro- or anti-bailout lines.

"All our tools are based on a society that does not exist any more," said Costas Panagopoulos, at ALCO pollsters. "We cannot exclude any scenario."

The anti-bailout parties are too divided to rule and even if New Democracy and PASOK scrape together enough votes to renew a fractious coalition they set up in November to clinch a second bailout worth 130 billion euros, the government could be too weak to weather public anger for long.

"The risk is high that after the elections, no stable coalition can be formed which would be willing to implement the next budget cuts and reforms," Berenberg Bank said in a note.

It said that if Greece did renege on its commitments, Athens would probably have to leave the euro, something most Greeks oppose.

The acid test will come fast: the new government must next month get parliament to approve over 11 billion euros in extra spending cuts for 2013 and 2014 to keep getting bailout aid.

With an economy which has already narrowed its budget deficit from 15.6 percent of GDP in 2009 to 9.1 last year and is forecast to shrink by another five percent in 2012, that will be a tough task in a newly hostile parliament.

If no party wins outright on Sunday, as expected, the president will give the biggest group - likely to be New Democracy - three days to form a government. If it fails, the next largest group gets a chance and so on down the line. If they all fail, new polls would be called in about three weeks.

The Greek ballot could well steal the limelight from the expected election of Socialist leader Francois Hollande in France, where anger over economic pain has also played a leading role.

"The wild card is Greece, and markets are starting to get nervous about it," said Sassan Ghahramani, CEO of New York-based hedge fund advisers SGH Macro. "We could see peripheral bonds and the euro pressured on Monday."