The world has been waiting for new elections in Greece for over six weeks and now the wait is finally over.
Over the weekend, the New Democracy party managed to win a majority in parliament over a month after the previous elections left Greece without a government.
Since then, the world has been holding its breath to see whether a new administration would either accept or deny the European Union’s demands leading up to a bailout.
It’s certainly a confusing situation. So we thought we’d take some time out to explain everything with a Q&A:
So we’ve been waiting for this election for six weeks now. What’s happened?
As we pointed out last month, solutions for the country’s ongoing debt crisis fall into two groups.
The first group, represented by the conservative New Democracy party, want to implement harsh austerity measures in order to receive bailout funds from the European Union – a bailout worth 130 billion euros.
On the other side, there’s Syriza, which has vigorously campaigned against the austerity measures saying the Greek public shouldn’t have any of their services taken away.
Stop stalling! Who won?
In a result that will appease investors and allow politicians to breathe a sigh of relief, the pro-bailout party New Democracy managed to win with 30% of the vote.
Together with the pro-bailout Pasok, New Democracy will be able to hold more than 160 seats in the 300-seat parliament.
With a pro-bailout government in place, Greece will be able to implement its austerity measures, and receive a much-needed bailout from the EU.
And it’s probably going to happen fairly quickly. New Democracy leader Antonis Samaras said yesterday he’ll try to form a government as soon as possible, and even the leader of Syriza, Alexis Tsipras, said New Democracy should be given leave to form a coalition.
That all sounds great. But remind me again why Greece getting a bailout is so important?
Because if it doesn’t get more funds, then the country will default – and that would be bad for everyone.
For one thing, there’ll be a run on banks, and funding will dry up just as it did during the 2008 global financial crisis. That means upward pressure on interest rates, including mortgage rates in Australia.
Neighbouring countries already in trouble, such as Italy, will feel the effects as well. Economies in the area will grind to a halt.
Closer to home, the sharemarket will drop, and the Asia-Pacific region will suffer as European demand for exports falls. That means lower demand for Australian resources.