European Central Bank
Reuters
Greece's conservative leader began talks to form a government on Monday after winning an election that sets him the task of imposing punishing austerity measures in a near-bankrupt economy while containing rising social tensions.
New Democracy conservative leader Antonis Samaras was due to meet Evangelos Venizelos, the head of the Socialist PASOK party after he received a mandate to form a government from the president.
The once-mighty PASOK, now reduced to third place after the dramatic rise of the radical leftist anti-bailout party SYRIZA, said it would support Samaras but had not yet decided whether to join the government or just offer parliamentary backing, according to Reuters.
Samaras's narrow defeat of SYRIZA caused relief across the euro zone, where countries had said Greece's future in the single currency depended on its meeting conditions attached to a bailout, which SYRIZA had vowed to tear up.
If SYRIZA had won - and claimed the 50 extra seats in parliament for the party that placed first - it would have been impossible to form a government supporting the bailout.
European leaders viewed Samaras's victory as an aversion of catastrophe. But any relief in financial markets vanished within hours as a rally on Monday quickly reversed.
Samaras still wants a better deal from Europe. He said Greece would meet its bailout commitments, but added: "We will simultaneously have to make some necessary amendments to the bailout agreement, in order to relieve the people of crippling unemployment and huge hardships."
The small Democratic Left party indicated it would be ready to support Samaras if the bailout deal could be softened.
SYRIZA leader Alexis Tsipras again ruled out joining a pro-bailout coalition government.
Germany, the euro zone's paymaster, gave little sign it was willing accept more than minor changes to the timing of some targets in the 130 billion euro ($164 billion) rescue agreed with the European Union and International Monetary Fund.
In deep recession, crushed under its huge public debt and forced to slash public spending and hike taxes repeatedly, Greece is struggling to restore its near-bankrupt economy. A new government could face protests soon after taking office.
"The crisis has been postponed, not necessarily averted," said Theodore Couloumbis, political analyst and vice-president of Athens-based think-tank ELIAMEP.
"For this government to last it has to show results. You can't continue with 50 percent youth unemployment and a fifth straight year of recession," he said.
SYRIZA scored strongly in the election, particularly among young voters, and party leader Tsipras, 37, promised to continue opposition to painful austerity measures.
"I don't think anything good will come out of these elections," said Dinos Arabatzis, a 56 year-old taxi driver who voted for New Democracy. "Whoever is in power now will get burned. Samaras will get burned, and Tsipras will come out much stronger if we go to elections again - that's what worries me."
The election was a rerun of a poll on May 6, which Samaras had forced by withdrawing support from a previous government, but which had left him with too few seats to form a cabinet and Greece in a state of political disarray. Sunday's victory appears to justify his gamble, at least for now.
With nearly 100 percent of ballots counted, New Democracy won 29.7 percent of the vote, ahead of SYRIZA on 27 percent and PASOK on 12.3 percent.
With New Democracy's 50-seat bonus for placing first, a theoretical New Democracy-PASOK alliance would have 162 seats in the 300-seat parliament. Adding the Democratic Left would give it an even more comfortable 179 seat majority.
"The result showed people want the euro, but society remains divided. SYRIZA will be a militant opposition, possibly complicating the new government's efforts," a senior New Democracy official said on condition of anonymity.
"The new government must deliver a positive development soon - an easing of the bailout terms or a positive sign in the economy - or people will lose trust in a week."