Greece is entering the home stretch of its first election campaign since becoming a global financial pariah and the polls show no party gaining a mandate to enforce the austerity policies needed to stay in the euro. The final surveys, published on April 20, showed as many as 10 parties with a chance of winning seats in the May 6 vote. The two biggest, traditional rivals New Democracy and socialist Pasok, may be forced into a coalition. The country needs a functioning government to ensure that it continues to receive rescue funds to keep its economy afloat.
Greece has been in recession since 2008, the year before it last elected a prime minister. It has received two bailouts and negotiated the biggest debt restructuring ever, a writeoff of about 100 billion euros ($132 billion). To keep aid flowing, the next government must make cuts equivalent to 5.5 percent of gross domestic product in 2013 and 2014, recapitalize banks and persuade voters that open-ended austerity is a price worth paying to stay in the euro.
“There are two worries,” said Sarah Hewin, senior economist at Standard Chartered Plc in London. “It may take time for the two main parties to negotiate a coalition after the election. Second, without a clear mandate from the electorate, the new government is likely to face ongoing parliamentary opposition to austerity and reform.”