Greece has a new government as Syriza forms coalition with right-wing Independent Greeks

The parties are united by their opposition to the loan agreement between Greece and the EU

The coalition between Greece’s left-wing election victors Syriza and the right-wing Independent Greeks has been described as the "worst possible outcome" for the country's troubled economy.

It took less than an hour of talks this morning for an alliance to be struck, with the groups bridging their numerous differences in a shared opposition to austerity measures enforced by the EU.

Economics analyst Wolf Piccoli, from Teneo Intelligence, told Bloomberg that although Syriza may enjoy a short "honeymoon", it is badly paired with its new coalition partner and the inevitable clash of extreme left and right-wing ideas could cause instability.

"It is the worst possible outcome, let’s be very clear about that," he said. "The Independent Greeks are a conspiracy-prone nationalist party…it’s a bad mix, let’s put it that way. Also there’s not much experience in government on both sides.

Panos Kammenos' Independent Greeks have been described as a 'conspiracy-prone nationalist party'

"This is a coalition of strange bedfellows because apart from the anti-austerity approach, these are two parties that are ideologically very divided.

"One is extreme left, the other is extreme right, they share no views at all together concerning issues like migration, like citizenship, so the glue is just about anti-austerity."

The leader of Syriza, Alexis Tsipras, was sworn in as Greece's new Prime Minister by 2pm and is expected to appoint his cabinet later today when he submits the names to President Karolos Papoulias.

The 40-year-old broke with tradition and took a secular oath rather than the Greek Orthodox religious ceremony with which prime ministers are usually sworn in.

The combination of Syriza's 149 MPs and the Independent Greeks' group of 13 will give the Government a slim majority of 162 seats out of 300.

greece-6.jpgIn a statement to reporters as he emerged from Syriza's headquarters this morning, Independent Greeks leader Panos Kammenos said: “I want to say, simply, that from this moment, there is a government. The Independent Greeks will give a vote of confidence to the Prime Minister Alexis Tsipras.

“The aim for all Greeks is to embark on a new day, with full sovereignty.”

Syriza swept to a historic victory yesterday with its radical pledge for a “new deal” for the country’s finances, vowing to completely re-write its massive bailout deal with the Eurozone.

It narrowly missed out on a majority in the Greek parliament but beat current Prime Minister Antonis Samaras's conservative coalition into second place and the neo-fascist Golden Dawn into third.

Thousands of supporters turned out to watch 40-year-old Mr Tsipras speak in central Athens after his opponents conceded defeat last night.

“The Greek people have written history,” he said as the crowd roared its approval. “Greece is leaving behind catastrophic austerity, fear and autocratic government.”

Alexis Tsipras, opposition leader and head of radical leftist Syriza party, greets supporters after the initial election results for the Greece general elections in Athens

But the new coalition partners may prove to be uneasy bedfellows.

While Syriza founds its vision of a new Greece in socialism, promising to write off national debt, hugely increase public investment in services and the welfare state and raise employment levels, the Independent Greeks have taken a more populist stance by opposing immigration and multiculturalism and calling for a greater role for the Orthodox Church in education.

The party, said by some analysts to be the "Greek equivalent of Ukip", is home to several defectors from the centre-right New Democracy and reached a peak of 33 MPs after the 2012 Greek elections.

Both groups strongly reject the loan agreement between Greece, the EU and the International Monetary Fund, now uniting to negotiate with international lenders while attempting to keep the country’s fragile economy afloat.

Yanis Varoufakis, the newly-appointed finance minister, said Syriza had won a "poisoned chalice" in an interview with Radio 4's Today programme.

"Tragically our state became bankrupt and Europe decided to deal with this by placing the largest loan on the poorest shoulders on the condition that we would have to shrink our income to a quarter," he added.

"Anyone could see this would be bad news and this fiscal waterboarding turned Greece into a dead state.

"The one glimmer of the light is that the Greek democracy decided to elect us. And to quote your Dylan Thomas we tried to go into the light and did not go gentle into that night."

Anti-austerity voters during a rally outside Athens University Headquarters in Athens

He said the billions spent on the Eurozone bailout had gone into the "dark pit of creditors" and Greece needed to end that vicious cycle with "genuine reforms...putting an end to corruption and bureaucracy".

The new government , which will keep the Euro, faces an immediate cash shortage, with a dwindling primary surplus, upcoming loan repayments, and limits on the money it can raise using treasury bill auctions.

The Eurozone has already felt the impact of the surprise election result, with stocks on Japan's Nikkei index down 0.25 per cent on European concerns.

The Euro fell sharply against the dollar last night, hitting a low of as $1.1088 - the lowest level against the US currency in more than 11 years.

Supporters of Germany's left-wing Die Linke party, hold placards as they show their support to Alexis Tsipras, leader of Syriza left-wing party after his speech to supporters in central Athens

Syriza's financial planning official, Giorgos Stathakis, confirmed today that the new government had no plans to meet negotiators from the “troika” of the European Central Bank, the European Commission and the International Monetary Fund and would instead seek talks directly with governments.

Greek voters swung to the once-marginal left-wing party after five years of punishing austerity measures demanded under 240 billion euro (£179 billion) bailout deals threw hundreds of thousands of people out of work and left nearly a third of the country without state health insurance.

Additional reporting by agencies