Photo: Business Insider
Scroll for the latest updates.ORIGINAL (12:03 PM ET): The first exit polls are out in Greece, and it looks like New Democracy is in the lead, albeit by a tiny margin.
While these are just early results, this could bring either a huge sigh of relief to Europe–or another disastrous deadlock.
If the conservative, pro-bailout New Democracy party is able to hold out in front as more results roll in, it will get a 50 seat bonus. Then it’s all up to PASOK to win enough support to allow the two pro-bailout parties to form a coalition.
Market-positive news is that PASOK may just have won that support…barely.
Bad news (for markets, at least) is that ND’s lead is razor thin–just 0.5 per cent ahead of SYRIZA in the exit polls. Different polls out of SKAI TV even suggest that SYRIZA is actually in the lead by a 0.5 per cent margin.
If ND is unable to come in first place, then SYRIZA would receive the 50-seat bonus, making it difficult for PASOK and ND to form any kind of coalition. That would likely leave all parties unable to form a government, meaning that we’ll see a third round of Greek elections.
A third round of elections would potentially be disastrous for markets. Fear that Greece will default in a disorderly fashion and leave the euro have already led Greeks to start pulling euros out of their banks. Analysts worry that full-scale bank runs in Greece could prompt bank runs across Southern Europe, as investors speculate that Greece won’t be the only country to leave the euro.
UPDATE (1:39 PM ET): It looks like New Democracy is still in the lead after the second exit poll, in fact pulling ahead away from SYRIZA, with 28.6-30 vs. 27-28.4 per cent of the vote. The Greek Ministry of the Interior sees New Democracy coming in with even more support–some 31.02 per cent.
This bolsters our initial conjecture that New Democracy might be able to form a coalition with PASOK, as the latter appears to have won 11-12.4 per cent of the vote based on the most recent polls. In fact, it would give New Democracy and PASOK 159 seats in a 300-seat parliament.
That said, these estimates count only about 20 per cent of the total vote, mostly from urban areas. SYRIZA has arguably won more support in rural areas which report later, so this election remains very much up in the air.
If the pro-bailout parties were to win, this would mark a continuation of the ideology that has governed the crisis so far. That said, the outpouring of support for parties that contest the terms of the bailout plan would likely lead to some renegotiation of the terms–extensions on aid repayments, for instance, or perhaps even some kind of stimulus funding from the European Union.
Unfortunately for those who support SYRIZA, however, a coalition of PASOK and New Democracy would not necessarily lead to a watershed moment with Europe. While positive for markets, this can be seen as a negative to those who thought a SYRIZA victory might force EU leaders’ hands on more fiscal integration and a new crisis approach.
UPDATE II (2:40 PM ET): It appears that New Democracy is still in the lead after the first official results, but we’ve now heard of a disturbing new development. Reports are circulating that PASOK will not participate in a government without SYRIZA’s support after statements from a number of PASOK officials.
PASOK is concerned–and rightly so–that a thin coalition with New Democracy would be easily ousted if the situation deteriorated in Greece. SYRIZA would then likely use new angst to its advantage, and almost assuredly win an election in a few months time.
While it makes sense for ND and PASOK to try and include SYRIZA in a technocratic coalition, this may not be feasible. And it seems unlikely that New Democracy and PASOK would throw up their hands and agree to a third election should SYRIZA refuse to join them.
We’ll have more on this development as we start to hear from the highest ranks of party leadership.
While you’re waiting…This Is What Happens If Greece Exits The Euro >