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Greek election: European markets stumble as pro euro party wins

The Greeks — narrowly — opted for a safer course, voting for the pro-bailout, pro-euro zone parties.

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Radical left Syriza party supporters listen to their leader making a speech on June 17, 2012, outside the University of Athens. (Louisa Gouliamaki/AFP/Getty Images)

BERLIN, Germany — Depending on how you look at it, Greece has either pulled back from the precipice or has lost a vital bargaining chip.

The world closely watched Sunday’s election, waiting to see if the Greeks would reject austerity once and for all or not. If they did, it could have led Greece to leave the euro zone, causing a jolt to the world economy.

In the end, the Greeks — narrowly — opted for the safer course. They backed the pro-bailout parties.

The conservative New Democracy party just barely beat the leftist Syriza party to first place after a closely fought contest that saw both sides presenting very different ideas of how to deal with the crisis.

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New Democracy’s leader, Antonis Samaras, said that Athens had to stick to its agreement with its international lenders if it wanted to find a better deal. Syriza’s leader, Alexis Tsipras, argued that this was the path to ruin and that only by rejecting that agreement had Greece any hope of getting out of its deep recession.

Crucially, New Democracy also portrayed the election as a de-facto referendum on euro zone membership, something that 80 percent of Greeks say they want to hold on to.

Fears of the potential risk involved with leaving the euro zone appear to have given Samaras the win. New Democracy secured 30 percent of the vote against Syriza’s 27 percent, and in doing so won a crucial bonus of 50 extra seats in parliament. That puts it in a strong position to form a government most likely with center-left PASOK, which secured just over 12 percent, and possibly also with other smaller parties. Coalition talks are to start on Monday.

“The Greek people voted today to stay on the European course and remain in the euro zone,” Samaras said in his victory speech on Sunday night. “There will be no more adventures. Greece’s place in Europe will not be put in doubt.”

Yet by supporting the pro-bailout parties, Greeks have chosen to bring back to power the very politicians they severely punished in the last vote, just six weeks ago, on May 6.

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Voters vented their fury at the parties that had alternated power for almost 40 years since the overthrow of the junta. They are both regarded as bearing a huge responsibility for mismanaging the country’s finances and for then imposing harsh austerity at the behest of the troika of international lenders: the European Central Bank, European Union and the International Monetary Fund.

There appears to be no end in sight to the country’s woes. The economy has been contracting for five years, unemployment is at 22 percent and the measures taken so far are widely regarded as having exacerbated the situation.

Syriza and its charismatic leader, Tsipras, pledged to lead Greece out of the crisis by tearing up the memorandum signed in March to secure the second bailout of 130 billion euros, following a 110 billion euro rescue package in 2010.

At the same time Syriza insisted that it wanted Greece to remain in the euro zone.

Although New Democracy and PASOK rejected Syriza’s calls to abandon the agreement, they campaigned on the basis that it could be renegotiated. Their argument was that Greece was better off searching for some kind of adjustment while sticking to the deal rather than pursuing the confrontational course that Syriza supported.

New Democracy argued that a Syriza-led government would inevitably cause funding to be cut off and a return to the drachma, Greece's former currency. All the talk of a Greek exit from the euro zone prompted many to withdraw their cash from banks — to the tune of around $750 million a day.

Fear grew that if the far-left emerged as victors, a massive run on Greek banks would force Greece out of the euro zone, since once the banks ran out of euros, the Greek state would have to print its own money.

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However, Syriza accused their opponents inside and outside Greece of scaremongering and argued that the EU was bluffing and would never allow Greece to exit the euro zone, which could have led