Greece's opposition Socialist party was headed for victory in national elections on Sunday, as voters rejected the incumbent center-right party which had been tarred by scandals and unpopular economic policies during its five-and-a-half years in office.
According to early official estimates, the Socialist, or Pasok, party, secured 43.8% of the vote, translating into a majority of 160 seats in Greece's 300 member parliament. That should give Greece's new government a freer hand to introduce the hefty stimulus packages it says are needed to revive Greece's suffering economy.
"This is an historic victory which also comes with very great responsibilities," senior Pasok parliamentarian Evangelos Venizelos said shortly before the party had officially declared victory.
The incumbent New Democracy party won 33.9% of the vote, the estimates showed, meaning that its current 151 seat majority will shrink to 92 seats - the worst electoral showing for the party since it was founded -by the current prime minister's uncle - in 1974.
To tackle what is expected be Greece's first recession in 15 years and a jobless rate of 9%, the Pasok party has vowed to pursue a EUR3 billion stimulus program. It has also pledged to raise taxes on the wealthy and clean up endemic corruption in the public sector.
The incumbents had promised an austerity program to cut the government deficit - which is forecast at between 6% and 8% of gross domestic product this year, far above the European-Union mandated level - and to continue to liberalize Greece's overregulated economy.
In the streets outside the Pasok party headquarters in central Athens - close to the epicenter of student riots last December - thousands of supporters gathered in victory celebrations, waving flags and cheering. Television images showed Pasok party leader George Papandreou mobbed by supporters as he made his way to the party headquarters.
"This is a chance for Pasok to really show its stuff. I think we can expect some positive surprises," said Spyros Draenos, 64, a Greek academic and long-time Pasok supporter. "I think people are really happy."
The Socialist victory bucks a wider conservative trend across Europe. France and Italy are governed by center-right governments. Germany returned center-right Chancellor Angela Merkel to power last Sunday, and the U.K. is moving toward choosing a Conservative government in 2010, ending Labour's unbroken rule since 1997.
On Sunday, Italy's center-left Partito Democratico said the Pasok's victory should serve as an example for other left-leaning parties across the continent. The Pasok party "confirms that when the Left synchronizes itself with the changes and expectations of society, it reaps consent and confidence," Piero Fassino, who runs foreign policy for the PD, said in a statement on Sunday night.
In the weeks leading up to the vote, it had been unclear whether Pasok would secure an outright majority, stoking fears of a hung parliament and sending jitters through Greece's equity and bond markets.
Still, voters on Sunday chose to punish New Democracy, not only for the country's ailing economy but also for a string of scandals - including last year's revelations of a controversial land-swap deal the government entered with a local monastery that cost taxpayers more than EUR100 million.
Among the first challenges facing the new government will be to present a credible program to the European Commission on how it plans to reduce Greece's budget deficit in the short term and, in the medium-term, how it plans to cut the country's giant debt burden, which is estimated to top 100% of GDP this year. The European Commission has given Greece until the end of 2010 to bring its budget deficit below the European Union-mandated ceiling of 3% of GDP - a target the country is unlikely to meet.
The Socialists will also have to tackle other problems, including cracking down on widespread tax evasion. It is estimated that about a quarter of tax revenue is lost through evasion.
"The first thing the Socialists will have to do is develop a three year budget program to show the Commission how it plans to reduce the budget deficit," said Panagiotis Petrakis, head of the economics department at the University of Athens. "After that it will have to work out a long-term program, say, for the next 10 years that will focus on long-term structural reforms."
Greece thrived after adopting the euro in 2001. Rules for adopting the currency, such as holding down inflation and the government deficit, led to lower interest rates, which triggered consumer and housing booms. Before the global economic crisis struck, the Greek economy expanded at an annual average rate of 4% for five years, one of the euro zone's best performances.
But Greece has been buffeted by fallout from the financial crisis. Shipping companies lost business, and though the Greek economy continued to grow until the 2009 first quarter, it was hit this summer as Northern European tourists stayed away from the country's beaches.
In Sunday's elections, three other smaller parties, including the Communist Party of Greece (KKE), the Coalition of the Radical Left (Syriza), and the right-wing nationalist party LA.O.S., also secured enough votes for representation in parliament.