UPDATE: Greek Socialists Win In Local Polls, Drop Election Threat
By Alkman Granitsas and Nick Skrekas Of DOW JONES NEWSWIRES
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ATHENS (Dow Jones)--Greece's ruling Socialists appear to have survived a key test of their popularity in local polls Sunday, prompting Prime Minister George Papandreou to drop his threat of early national elections if the vote went against him.
With more than 50% of the votes counted, Socialist candidates were on track to win in 7 of Greece's 13 electoral regions--including the all important province of Attica, home to 40% of the Greek population--against five for the opposition New Democracy party. In the region of Eastern Macedonia and Thrace, the race between the two main parties was in a statistical dead heat.
Socialist candidates were also leading in three of the country's five biggest municipalities, compared with two for New Democracy.
"While the Socialists have lost a lot of support, they still remain the number one party," said George Kyrtsos, a political commentator and editor of the City Press newspaper.
The elections come amid widespread voter discontent and are seen as a referendum on the Socialist government's harsh, three-year austerity program, which has been heavily criticized by the opposition.
The government has warned that poor results could force it to call new nationwide polls after only 13 months in office--a prospect that has unsettled the country's financial markets and drawn veiled criticism from Greece's international lenders.
But with the early projections Sunday, Prime Minister George Papandreou appeared satisfied with the results and gave no hint that he planned to call early elections.
"We know that change is not an easy process," Papandreou said in a nationally televised address. "But the Greek people brought us to power one year ago to effect that change. And today they confirmed that they still want that change."
In May, Greece narrowly avoided default with the help of a EUR110 billion bailout from the International Monetary Fund and European Union in exchange for a three-year austerity and reform program.
That program has led to steep cuts in pensions and public-sector salaries, as well as a raft of new taxes on everything from cigarettes to basic foodstuffs.
The spending cuts and new taxes have also weighed on the economy, which is expected to shrink by 4% this year, while unemployment has rocketed to 12% in July from 9.6% a year earlier and business bankruptcies have soared.
But even though the partial results Sunday showed a Socialist victory, they also showed that as many as four in 10 voters stayed away from the polls.
According to official data, only 60% of the electorate turned up to vote, compared with 70.9% who took part in the most recent national elections in October 2009, and 72.4% in the previous local polls in 2006.
"There is a general disregard for the whole political system with the two main parties getting less than 40% of the vote altogether after abstentions," said Dimitris Rizos, editor of the center-right Adesmeftos Typos newspaper, speaking on the privately owned Alter television channel.
What's more, in all but two of the key races, no candidate from either party has so far secured more than the minimum 50% of the vote required, which means they face run-off elections next Sunday.
And according to projections by two private television stations, the Socialists now command only a two- to three-percentage-point edge over New Democracy, sharply down from their winning 10-percentage-point margin in national polls last October.
"I didn't go to vote because I didn't want to waste my time with this decayed political system," said 34-year-old engineer, Kostantina Antonopoulou. "I am sick of the incompetence and the corruption, and I can't see anything changing no matter who wins."
Still, the results should go some way to soothing investor nerves rattled by fears of political instability in Greece.
That prospect has spooked investors in the past two weeks--in that time the Athens stock market has fallen about 8%, while the interest-rate spread between 10-year Greek government bonds and their benchmark German counterparts--a measure of credit risk--has jumped to above 880 basis points from about 700.
"Prime Minister George Papandreou's remarks appear to reduce the possible risk of an early election," said Platon Monokrousos, a senior economist at EFG Eurobank Ergasias SA (EUROB.AT). "On that basis, a significant risk of political instability that is already priced in Greek sovereign-bond spreads, seems to be overdone. We should see a tightening of spreads over the following few days," Monokrousos said.
-By Alkman Granitsas and Nick Skrekas, Dow Jones Newswires; +30 210 331 2881; alkman.granitsas@dowjones.com
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