Bloomberg News

Greece’s Samaras Becomes Premier of Three-Party Coalition

June 20, 2012

Greek Leaders Poised to Agree on Three-Way Governing Coali

Stories about the results of the Greek elections in Athens. Photographer: Chris Ratcliffe/Bloomberg

Antonis Samaras, head of Greece’s New Democracy party, was sworn in as prime minister after Greek political leaders agreed on a coalition that will seek relief from austerity measures tied to international loans.

New Democracy, which won a June 17 election with almost 30 percent of the vote, will join forces with the socialist Pasok party, which finished third, and the sixth-place Democratic Left. They will hold 179 seats in the 300-member parliament, ending a period of political limbo that began with an inconclusive May 6 election.

“We have the required outcome, which is a necessary condition for the creation of a new, long-term, government that will give stability and hope to people,” Samaras said today in Athens before he was sworn in by President Karolos Papoulias.

European officials have held out the prospect of flexibility over fiscal austerity for Greece after the country’s election amounted to a referendum on remaining in the 17-nation euro currency union. Greece has slipped behind budget-cutting targets imposed by the euro area and the International Monetary Fund in exchange for 240 billion euros ($305 billion) in aid pledges over the past two years.

Samaras, Pasok head Evangelos Venizelos and Democratic Left leader Fotis Kouvelis have committed to establishing a coalition that will keep Greece in the euro and fight to loosen austerity requirements that have helped drive the country into a fifth year of recession. The government in Athens may seek to push back against required cuts in pensions and the minimum wage and the pace of budget-deficit reductions.

Euro Rises

The Standard & Poor’s 500 Index dropped 0.1 percent at 10:29 a.m. in New York, following a four-day rally while the Stoxx Europe 600 Index added 0.4 percent. The euro rose 0.3 percent to $1.2719. The Athens Stock Exchange Index advanced 0.5 percent to 603.04, its sixth day of gains.

European leaders have sent mixed signals about granting Greece leeway. European Union President Herman Van Rompuy said after the election that “we will continue to stand by Greece,” while German Chancellor Angela Merkel took a tougher line by declaring “there can be no loosening on the reform steps.”

More Aid

The potential fight ahead was highlighted when European Central Bank Executive Board member Joerg Asmussen, who comes from Germany, said any decision to grant Greece more time while it still has a primary budget deficit means the country would need more aid. Greece’s goal has been to have a primary surplus in 2013.

“As long as a country has a primary deficit,” giving it more time to meet its fiscal targets automatically means “that there is an additional external financing need,” Asmussen said at a panel discussion in Berlin on June 18.

The task of winning budget concessions will fall on Vassilios Rapanos, chairman of National Bank of Greece (TELL) SA who is due to be appointed finance minister, according to an official with the Democratic Left.

Rapanos is affiliated to Pasok, which today decided that its representatives in the new government won’t be members of parliament.

Talks continue in Athens among New Democracy, Pasok and Democratic Left on the coalition-government ministers, who may be announced later today. Caretaker Finance Minister Giorgios Zanias will represent Greece at a June 21 meeting of euro-area finance ministers in Luxembourg, said Venizelos.

Bailout Terms

Venizelos and Kouvelis have proposed establishing a team, including people from outside the ruling coalition, to renegotiate the bailout terms. Venizelos said yesterday that Syriza, the biggest anti-bailout party that finished second in the June 17 vote, refused to take part, a day after it rebuffed calls to join the government.

Samaras said the Greek government has “hard work” ahead.

Constantinos Zouzoulas, an analyst at Axia Ventures Group Ltd. in Athens, said he expects Greeks to give the new coalition a “grace period” of several months to enact its program after two elections in six weeks.

“People are exhausted from the long elections and they mainly want to see signs that the free fall of the economy is ending,” he said in an e-mailed note. “The next 100 days are crucial for Greece.”

Skepticism

Euro nations such as Germany, the Netherlands and Finland are increasingly skeptical about Greece’s ability to meet the austerity conditions of the rescue, which have imposed a fiscal straitjacket that has led to four governments -- including two caretaker administrations -- since late 2009.

Greece narrowed its budget deficit from more than 15 percent of gross domestic product in 2009 to 9.1 percent in 2011. The country’s spending gap is due to fall to around 7 percent of GDP this year. Unemployment in Greece has reached a record of more than 22 percent.

European creditors are prepared to ease the bailout terms, said a European official who briefed reporters in Brussels on condition he not be named. A first step will be when Greece’s government requests changes to the rescue terms, leading to a revision of the country’s economic-performance targets sometime before September.

European and IMF budget experts have said they’ll head to Athens for their next review of Greece’s eligibility for the subsequent round of quarterly loan disbursements when a new administration is formed.

Greece will run out of money in mid-July, Syriza said on June 13 after being briefed by the finance ministry’s Zanias.

To contact the reporters on this story: Jonathan Stearns in Athens at jstearns2@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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