Prospect of Early Elections Has Renewed Fears Over Country’s Relationship With International Creditors
By NEKTARIA STAMOULI And STELIOS BOURAS, Wall Streej Journal
ATHENS—Greece will go to snap elections early next year after the government failed Monday to get its presidential candidate elected, thrusting the country into fresh political uncertainty.
The result raises the stakes for Prime Minister Antonis Samaras, whose last-minute attempt to convince lawmakers to back his candidate fell short of the mark even after he offered concessions in an attempt to swing independents.
Out of the parliament’s 300 lawmakers, 168 voted in favor of former European commissioner Stavros Dimas, failing short of the 180 votes needed to choose a head of state. The remaining legislators abstained from the vote. Mr. Dimas failed to gather more votes than in the second round.
The prospect of new elections has renewed fears over the country’s financial problems and its relationship with its international creditors. The leftist Syriza party is leading in the polls, appealing to Greeks angry at the ruling coalition for imposing years of austerity as a requirement of clinching €240 billion ($292 billion) of international aid.
Many investors fear that already fraught relations with the troika of international inspectors—from the European Commission, the International Monetary Fund and the European Central Bank—could sour if a Syriza-led government backtracks on reform and austerity measures.
After plummeting lower at the start of the session, Greek stocks were just over 11% lower at 757 points after the failure of the government to get its candidate elected.
The euro, however, was just a whisker lower against the dollar at $1.2191. That is because the prospect of a Greek exit from the eurozone no longer has the same grim implications for the currency bloc as it did at the height of the crisis, said Commerzbank currency strategist Ulrich Leuchtmann.
“The systemic risks, which made this scenario so scary in 2010, have disappeared. A Europe-wide banking crisis would be very, very unlikely,” he says. Even so, a protracted period of negotiations between a Syriza-led government and Greece’s creditors is likely to place the euro under some pressure in the coming weeks, Mr. Leuchtmann added.
Elected to a four-year term in mid-2012, Greece’s current coalition government—composed of the conservative New Democracy and the socialist Pasok parties—wasn’t due to face elections again until June 2016.
ENLARGEBut under Under Greece’s constitution, if the parliament fails to elect a head of state, the government has to be dissolved within 10 days and the country must hold snap elections.
Mr. Samaras said Monday the country will hold elections Jan. 25. In a televised statement straight after the parliamentary vote, Mr. Samaras said he would go to Greece’s current president Karolos Papoulias on Tuesday and ask him to dissolve parliament ahead of the national polls.
The prime minister is now gambling that Greek voters fear insecurity more than they do austerity, and will reject Syriza. “New Democracy presents the dilemma as one between stability versus instability in Greece,” said Harris Mylonas, assistant professor of political science and international affairs at George Washington University.
It is not clear whether Syriza has enough support for an outright majority. The gap between Syriza and Mr. Samaras’ New Democracy has been closing in recent weeks, with government officials promising some tax breaks after the country exited a six year recession earlier in 2014.
Syriza’s lead has narrowed slightly in recent weeks to between 2.5 to 3.5 percentage points
When the government announced earlier this month that it would bring forward the presidential vote, the news shook markets, with the Athens general index on Dec. 9 suffering its biggest one-day loss since 1987.
