Greeks Court Chaos in Mass Protest Vote

… I'm worried that Greece has started down the path of exiting from the euro zone…

The Wall Street Journal 

New Parties Vow to Redo Bailout Terms; Prospects for Coalition Rule Look Dim

ATHENS—Greek voters on Sunday delivered a stinging rejection of the country's two incumbent parties—the Socialist, or Pasok, party and the conservative New Democracy—and the austerity program they support, raising the specter of political instability that could ultimately challenge the country's future in the euro zone.

More than 60% of the popular vote went to smaller left- and right-wing parties that have campaigned against the austerity program Greece must implement in exchange for continued financing from its European partners and the International Monetary Fund.

With the political landscape dramatically recast, difficult talks for a multiparty coalition were set to follow the election of Greece's most fragmented Parliament since the restoration of democracy and the fall of the military junta in 1974. But the prospect of a viable government emerging from these talks looked dim, raising the possibility of fresh elections before long—possibly by the middle of next month.

Greek voters' resounding rejection of austerity came the same day that the French elected François Hollande as president, giving that country a Socialist leader who has pledged to shift the burden of hardship onto the rich and resolve the protracted euro sovereign-debt crisis by softening the current prescription of fiscal stringency.

With more than 95% of the vote counted, Greece's two mainstream parties looked set to secure just 150 seats in the 300-seat Parliament, which would prevent them from forming a governing coalition on their own. The projection includes a 50-seat bonus awarded to the conservative New Democracy party which holds a slim lead with 19.1% of the vote and 109 seats.

The two parties garnered just under 33% of the vote between them, a sharp drop from the combined 77% they won in the previous election less than three years ago.

At least seven parties, most of which reject austerity policies, were poised to clear the 3% threshold needed to enter Parliament—meaning the next Greek government will have difficulty implementing the reform program demanded by the country's European and international creditors in exchange for funding a continued bailout for Greece.

In a surprise result, the Coalition of the Radical Left, or Syriza, which seeks to annul the austerity program, saw its share of the vote more than triple from the 2009 elections, to 16.4% of the vote and 51 seats—making it the second-largest party in Parliament—Interior Ministry projections showed.

Pasok took the brunt of voter anger, slipping to third place, with 13.5% of the vote and 41 seats, its worst showing in more than 30 years.

The far-right, anti-immigrant Golden Dawn party, with an estimated 6.9% of the vote, or 21 seats, will enter Parliament for the first time.

If final results confirm initial projections, a bipartisan coalition of New Democracy and Pasok is unlikely to deliver a viable government, capable of passing fresh reforms demanded by international creditors.

New Democracy leader Antonis Samaras and Pasok leader Evangelos Venizelos called for a cross-party government among those forces supporting Greece's efforts to stay within the euro zone.

"A coalition bipartisan government would not have adequate legitimacy, nor domestic or international credibility, even if it managed to garner a marginal parliamentary majority," Mr. Venizelos said in nationally televised remarks.

Mr. Samaras invited pro-European parties to join him in forming a coalition government that would seek to change reforms agreed under Greece's second bailout and shift focus on how to generate growth in the country, which is now in its fifth year of recession.

"We will take on the responsibility of forming a national salvation government with strictly two goals: keeping the country in the euro and modifying the memorandum [of understanding with Greece's creditors] policies so that there can be growth and relief in society," Mr. Samaras said in a televised address.

Left-wing leaders were quick to reject the call for a coalition government while reaffirming their opposition to the bailout policies.

Syriza leader Alexis Tsipras said he will stick by his commitment to annul the austerity package. "The parties that signed the memorandum now form a minority. Their signatures have been delegitimized by the people," he said in a televised statement.

Officials from the European Union and the IMF said Sunday that Greece must adhere strictly to the austerity program—which includes taking new measures in June—signaling there was little room for a new government to renegotiate the bailout terms.

"The program is the only way forward for Greece," an EU official said, adding that any renegotiation of the tough targets would be "within strict boundaries, very, very limited."

Sunday's election is Greece's first since its crisis began in late 2009 and after the country received two successive bailouts from its European partners and the IMF designed to prevent a disorderly Greek exit from the euro.

In November, Pasok formed an interim coalition with rival New Democracy party after former Prime Minister George Papandreou stepped down. That interim government, led by technocrat and former European Central Bank Vice President Lucas Papademos, was given the task of securing a new €130 billion ($170 billion) bailout for Greece and negotiating a related €200 billion debt restructuring.

But facing a raucous opposition of extreme left and right-wing parties—from Marxist-Leninists to anti-immigrant ultranationalists—opposed to the austerity program, the incumbent parties won't have the political muscle to implement the reform programs they backed.

"Greece is facing, for the first time in its postwar history, a double crisis: a political crisis and an economic crisis at the same time. This is a recipe for chaos that the country has never faced before," said Anthony Livanios, a political risk consultant. "I'm worried that Greece has started down the path of exiting from the euro zone."

The first task of a new government will be to detail €11.5 billion of further cutbacks to deal with expected budget gaps in 2013 and 2014. In the next few weeks, a troika of international inspectors—from the European Commission, the IMF and the European Central Bank—is expected in Athens to hammer out the new austerity measures. If Greece fails to take them as promised, it risks being cut off from badly needed European and IMF funds.

But IMF officials said the troika visit won't take place until a new Greek government was in power and ready to negotiate. An IMF official said its representatives "will only return to Greece if the new government is ready to finalize new cost-cutting that has already been agreed."

"We are facing an impasse," a former Pasok cabinet minister said. "The numbers of the pro-austerity parties don't add up for any kind of stable government. There needs to be a lot of compromise and there is not much space given to Greece by the creditors to extent or mellow down the bailout program. I see new elections soon."

Heading to the polls earlier Sunday, voters indicated their shift toward leftist or extremist parties that have opposed the spending cuts and tax increases prescribed by international lenders.

In Petroupoli, a lower-middle-class district in western Athens and traditional Pasok stronghold, entire families turned up at the voting booths.

Katerina Trikardou, a 39-year-old English-language teacher said she had chosen to vote for Syriza for the first time in her life because she wanted to cast a protest vote against Pasok, for which she had voted in the past.

"My parents voted Pasok, I voted Pasok, my husband voted Pasok," she said. "This time I voted for Syriza, Pasok is dead to me. They put us in this mess."

Across town in a middle-class Athens district, Costas Papageorgiou, a 26-year-old book seller, said he had plumped for the newly formed nationalist Independent Greeks Party of Panos Kammenos—who has tapped into anti-German sentiment in Greece—turning his back on the two mainstream parties.

"Things are in really bad shape however you look at it. It's not that I am against the austerity program or the IMF, it's just that someone with new ideas has to do something for the economy and so that the country can hold its head high," said Mr. Papageorgiou, also a former Pasok voter.

—Costas Paris and Nektaria Stamoulis contributed to this article.

Write to Alkman Granitsas at alkman.granitsas@dowjones.com, Stelios Bouras at stelios.bouras@dowjones.com and Matina Stevis at matina.stevis@dowjones.com