Greece elections pose a crucial dilemma _ Q&A

June 15, 2012 RSS Feed Print

Both PASOK and New Democracy have vowed to try to renegotiate parts of the bailout in an effort to stimulate Greece's moribund economy. However, they do not advocate pulling the plug on the deal and insist the top priority is to keep Greece in the euro — something that 80 percent of Greeks want.

To form a government, the winning party — or coalition — needs to hold a minimum of 151 of Parliament's 300 seats. Whichever party comes first will get a bonus of 50 seats in Parliament under the Greek electoral law. Still, it is highly unlikely that any party will win enough seats for an outright majority — meaning there will be another round of negotiations to form a governing coalition.

BUT APART FROM GREECE, THE EUROZONE IS BACK ON TRACK, RIGHT?

Hardly. Spain has become the latest — and largest — country in the eurozone to ask for a bailout. The country's borrowing costs have shot up over the past weeks on concerns that it does not have the money to prop up its troubled banking sector, which has been crippled by a collapse in Spain's property market.

On Saturday, the Spanish government acknowledged it would seek outside assistance for its banks after the eurogroup —finance ministers from the 17 euro countries — agreed to offer Spain €100 billion in bailout loans. Spain will decide how much it needs once independent audits of the country's banks have been completed.

The bailout move was meant to calm markets ahead of the Greek elections. Instead it has had the opposite effect. Worried about the extra load on Spain's debt the bailout laon would have, markets have fought shy of Spain all week, sending its borrowing costs to the highest level since the country joined the euro in 1999. These jitters have been also felt in Italy, which is struggling to maintain its huge debts as its economy falters. Italy also saw its borrowing costs rise this week when it went to the markets to sell its debt.