Coalition negotiations are ongoing following the legislative elections in Greece on Sunday. The largest party, New Democracy, announced yesterday that it had failed to form a coalition after reaching out to every party in parliament except the fascist Golden Dawn, and so the impetus now passes to the surprise runners-up SYRIZA, the Coalition of the Radical Left. If they cannot form a government either, then it is almost certain that new elections will have to be held to change the coalition arithmetic.

As it stands, there is only really one possible coalition for SYRIZA. Like ND, they have rejected Golden Dawn, but they have also rejected ND itself. After holding talks with ND's leader, Antonis Samaras, the head of SYRIZA, Alexis Tsipras, said that:

The campaign positions of Mr Samaras are at the opposite end of the alternative proposals of a leftwing government. There can be no 'government of national salvation' as [Samaras] has called it because his signatures and commitments to the loan agreement do not constitute salvation but a tragedy for the people and the country.

With the largest party ruled out, SYRIZA would have to secure agreement from PASOK, the socialist centre-left, ANEL, the anti-austerity right, and KKE, the communist party, to form a coalition. In order to have a stable majority, the left-wing DIMAR would likely be included as well. Not only would such a grouping span the political divide, it would span the economic one, since PASOK are formerly members of the national unity government which implemented Greek austerity.

This uncertainty means that the predicted market response has failed to materialise. Although it is hard to separate reactions to the French and Greek elections, a small fall in the value of the Euro and larger fall in the value of Greek stocks appear to be the extent of the change. As Marc Chandler, currency strategist at Brown Brothers Harriman in New York, told the Financial Times:

The uncertainty has shifted from poor outcome uncertainty to policy uncertainty.

If SYRIZA did form a coalition, the results would likely be bad. The party broadly intends to default on Greece's debt and exit the Eurozone, in an attempt to escape the fiscal straightjacket imposed by Brussels. Unlike Spain and Italy, however, the imposition of austerity on Greece is matched by continued handing over of funds which the Greeks desperately need. The stable level for the country without that money is closer to Romania or Bosnia than Ireland or Portugal – and it is unlikely that a contraction of that scale is in SYRIZA's plan.

If SYRIZA fail to form a government, new elections are bound to occur. The outcome of them remains to be seen, but it will likely be a convergence to one of the larger parties. Which one makes all the difference.