Greece Elections and the Euro

While no party is expected to gain an absolute majority in Greece, coalition governments take their place and have a significant effect on legislature and country leadership. The leader of the party with a relative majority in Greece is appointed as Prime Minister, regardless of district voting. Essentially, a vote a member of a party in your district is the equivalent of a vote for the leader of the party for Prime Minister. In turn, the President of Greece is elected by members of Parliament every five years. The next Presidential election is scheduled for 2015.

Per Greek law, opinion polls on the election cannot be released within 14 days of an election, so the last available data is from Friday, June 1 and could be slightly outdated. Despite the restrictions on polls, with an expected 22.7% of the vote and 121 seats in Parliament, the New Democracy party is expected to lead a relative majority. The New Democracy party has backed the country’s international bailout and would be a significant force in Greek’s economic future. In contrast to the New Democracy Party, second place goes to The Coalition of the Radical Left with 16.78% of the vote for 69 seats. The Coalition of the Radical Left opposes the international bailout and advocates unilaterally canceling the austerity measures demanded for a bailout, with an agenda of re-negotiating the terms of the rescue. To put the austerity measures into perspective, the cuts required for 240 billion euros, or $306 billion, of aid have driven Greece into the worst recession since World War II. Finally, the bronze medal goes to the Panhellinic Socialist Movement with 13.18% of the vote for 35 seats. Overall, eight parties are expected to gain seats in the election with no party gaining an absolute majority.

In a nutshell, the Greek elections are a referendum on their place in the euro. If Greece stays in the euro, the US economy could stabilize in the coming months and sustain Obama’s concept of the US economy slowing improving. However, if Greece leaves the euro, the buzz around the Spanish bank bailout could lead to fears of another global crisis.

As no party will gain a complete majority in Parliament, a coalition government will be dependent on the willingness of parties to cooperate and should be led by the New Democracy party. Once the new Parliament takes effect, their first moves must be to return Greece to business as usual and focus on getting their economy back in line.

Thomas Doherty is an undergraduate at Villanova University majoring in Finance and Economics.