Parsing the Greek Election Results

Receiving Wide Coverage ...

New Democracy Wins: But wins what? The helm of an unraveling economic and political order, a spot many believe no government can hold onto for long?

In any event, Greece's three main contenders — the establishment parties New Democracy (center right) and Pasok (center left), and the upstart leftist coalition Syriza — all substantially increased their shares of the vote in yesterday's parliamentary election.

With the bigger take and the 50-seat bonus for coming in first, ND has a smoother path to forming a coalition than after the May 6 election, and the rest of Europe may have a more complaisant counterpart with which to renegotiate the bailout (perhaps involving a longer time frame for public sector cuts and tax increases, and infrastructure stimulus). That might mean lower chances for a near-term exit from the euro by Greece, and reduced risk of mortal runs on banking systems across the periphery. (Periphery means pretty much everyone but Germany.)

But markets now appear firmly focused on the broad flaws and imbalances in the currency union, and fail to rally much on incremental "good news." Wall Street Journal, New York Times, Financial Times

In the Times, an article explored obstacles to a banking union, which would involve strong supranational supervision and shared deposit insurance. Noting the desiccation of interbank lending, the paper observed that "banks and their national regulators, anxious about the Greek elections and Spain's hastily arranged bailout, are behaving more parochially than ever." Columnist Paul Krugman wrote that the Greek catastrophe is a consequence of fundamental engineering weaknesses in the euro zone, and explained his point by making strong analogies to the "dollar area" in the U.S.: "consider an older example, the savings and loan crisis of the 1980s, which was largely a Texas affair. Taxpayers ended up paying a huge sum to clean up the mess — but the vast majority of those taxpayers were in states other than Texas. Again, the state received an automatic bailout on a scale inconceivable in modern Europe."

In the Journal, an article profiled the rationales of individual voters as they went to the ballot box, leading with an electrical engineer who swung to ND because, he said, "We have to stay in the euro, regardless of the pain." The paper also ran a roundup of post-election jockeying and statements by party leaders, and a profile of ND top dog Antonis Samaras, who "has made a fast turnaround from Europe-bashing populist to the continental power brokers' preferred choice to lead Greece." "Heard on the Street" ticked off factors militating against infrastructure spending as an engine out of the European recession.

The weekend papers carried articles on planning and assurances by central banks (New York Times, Wall Street Journal) and their dependents ahead of the election.