Greek elections: Syriza win fuels fears of default

Alexis Tsipras has promised to keep Greece within the euro currency bloc as he pushes to secure a debt writedown and have budget constraints dropped. Photo / AP

Global markets are braced for an extended bout of extreme volatility after left-wing party Syriza stormed to victory in the Greek elections, intensifying fears that the country could default on its debts and be forced to abandon the euro.

The triumph is likely to trigger fears about the future of the European Union after Syriza swept to power to become Europe's first anti-austerity party, almost certainly putting Greece on a collision course with international creditors.

Alexis Tsipras, Syriza's leader, will become the country's youngest prime minister in 150 years after taking 36 per cent of the vote, compared with 28 per cent for the conservative New Democracy party of incumbent PM Antonis Samaras.

The euro slipped with US equity-index futures and Asian stocks as Syriza's victory fuelled concern for the common currency bloc.

The 19-nation euro dropped 0.3 per cent during trading yesterday to US$1.1169, near a more than 11-year low reached last week after the European Central Bank announced plans to pump cash into the economy to stoke inflation.

Standard & Poor's 500 Index futures sank 0.6 per cent and the MSCI Asia Pacific Index (MXAP) lost 0.3 per cent.

Tsipras, 40, has pledged to win a writedown of Greek debt and abandon budget constraints imposed in return for aid, goals which Samaras said would risk Greece's exit from the euro bloc. Tsipras has said he'll keep the nation within the single currency area as he negotiates on the debt.

However, results suggest Syriza, which wants to renegotiate the terms of Greece's 240 billion ($361 billion) bailout deal with the EU and International Monetary Fund, had failed to win a majority.

Despite the tough rhetoric, Tsipras' party is likely to have to make concessions if it wants Greece to remain in the EU. While Greek debt, at 175 per cent of gross domestic product (GDP), remains at unsustainable levels, any debt relief will be met with fierce opposition from northern states, including Germany and Finland.

Greece has struggled under repeated rounds of austerity that have pushed unemployment up to 25 per cent compared with the eurozone average of 11.5 per cent.

However, other experts played down the likelihood of any large-scale fallout from Syriza taking power, arguing that the impact is likely to have been mitigated by the European Central Bank's 1.1 trillion bond-buying programme.

Number crunch
*Greek debt is 175% of gross domestic product.
*Austerity has pushed unemployment up to 25%.
*Syriza wants to renegotiate the $361 billion bailout.

- additional reporting Bloomberg