Greek elections: voters give Europe and single currency a chance

Rightwing New Democracy party hopes to lead coalition while left gains from votes against austerity

Antonis Samaras is cheered after New Democracy won the largest share of the votes. Photograph: John Kolesidis/Reuters

European leaders working to avert a meltdown of the single currency gained some respite when Greek voters handed a narrow victory to mainstream conservatives and the chance to forge a pro-euro and pro-bailout coalition.

In the single most closely watched election in years, which amounted to a referendum on whether Greece would become the first country to be forced out of the single currency, the anti-austerity radical Alexis Tsipras was also given a boost, increasing his share of the vote to more than 27%. On a momentous night in European politics, Greece's conservative New Democracy, under Antonis Samaras, appeared to have pulled the country back from the brink of what many feared would be a national catastrophe and averted a much deeper immediate crisis in Europe.

Meanwhile, the Socialists in France, under President François Hollande, secured a comfortable absolute parliamentary majority, immeasurably strengthening the president's hand in the looming battles over the future of Europe and its beleaguered currency.

European leaders postponed their departure for a G20 summit in Mexico in order to be able to digest the outcome of the ballot in Greece, which posed the most severe challenge to the EU and the euro.

The fallout from the Greek election and the broader issue of how to avert a renewed European banking crisis and stabilise the currency will dominate the Mexico negotiations, with the US and the UK pressing the leaders of Germany, France, Italy and Spain to ward off the risk of collapse by coming up with persuasive action by the end of the month.

The G20 talks will be promptly followed by a flurry of EU summitry climaxing in a European Council of heads of government in Brussels at the end of next week.

Samaras will now be asked to try to form a government, after his New Democracy narrowly defeated Tsipras's Syriza coalition of radical leftists by 2.4 percentage points.

Emerging as the frontrunner in a nail-biting election billed as decisive for Greece's future in the eurozone, Samaras began the arduous quest to build a coalition with an appeal to form a government of "national salvation".

He hailed the result as a "victory for Europe". In a sense, after two years of Europe supplying a lifeline to Greece, the tables turned with the Greek electorate delivering a bit more time for Europe's leaders to secure the currency's future.

"The Greek people voted for the European course of Greece and that we remain in the euro," Samaras declared. "This is an important moment for Greece and the rest of Europe." Athens would honour its commitments made in exchange for rescue loans from the EU and IMF.

The arithmetic pointed to a grand coalition of the two traditionally biggest parties, New Democracy and the centre-left Pasok socialists, which mustered about 160 seats between them in the 300-seat chamber. But such a coalition between arch-enemies will be unstable.

The European powers will put pressure on the two traditionally big parties. Although ravaged in last month's inconclusive election, the two campaigned in effect to remain in the euro and to stick roughly to the draconian eurozone terms imposed on Greece as the price for two bailouts amounting to €240bn and a halving of its government debt.

Tsipras, who stunned Europe by coming from nowhere in May to take 17% of the vote and second place, improved vastly on his performance with some 27% by campaigning to reject the bailout terms, ameliorate the austerity programmes, and yet keep Greece in the euro. He might be happier to emerge as a formidable and strengthened opposition leader.

A chorus of leading EU politicians had warned the Greeks that a Tsipras victory would mean ejection from the single currency, a campaign that backfired to judge by the strength of the Syriza result.

All the signs now are that, despite the tough talk in the election campaign, the Europeans will shift to relaxing the terms of Greece's bailout, while emphasising that the broad conditions have to be met.

"I can well imagine that the schedule will be discussed again," said the German foreign minister, Guido Westerwelle, , suggesting that the timeline set for Greece's budget deficit reduction programme will be eased. Belgian officials made similar noises. There was nonetheless palpable relief across the European elite that Tsipras would probably not be able to form a government, which would have triggered a much more perilous phase in the European crisis.

Attention now turns to the broader plans being hatched for next week's summit aimed at charting the way towards a more stable, durable, and centralised eurozone "banking union" and "fiscal union".

The German government's response that it does not see why it should make those sacrifices at Britain's bidding in order to come up with a new regime that Britain is urging. The argument, likely to escalate over the coming weeks, is about the shape and powers for a new European "banking union" which would put some 25 of the biggest EU banks posing a "systemic risk" to the financial system under the authority of the European Central Bank in Frankfurt.