Greece elected a conservative government on a promise to cut taxes and spur economic growth, initial results showed, ejecting a left-wing government that couldn’t deliver an end to the country’s long economic slump.

Continue Reading Below

The center-right New Democracy party was set to win an absolute majority in Parliament in Sunday’s vote, making its pro-business leader, Kyriakos Mitsotakis, the next prime minister. With nearly all the votes counted, the conservatives were set to win 39.8 percent of the vote.

Under Greece’s electoral system, which rewards the party that comes in first, New Democracy was on course for 158 seats in the 300-seat Parliament in Athens.

The left-wing Syriza party of departing Prime Minister Alexis Tsipras, which tried to confront Greece’s German-led creditors after winning power in 2015 but was forced to back down and follow strict austerity policies, took around 31.5 percent.

“I will be the prime minister for all the Greeks,” Mr. Mitsotakis said in a public address from his party’s headquarters. “I am committed to lower taxes, to lots of investments, to more and better jobs.”

Greek voters’ return to a mainstream, traditional political party after trying the populist Syriza shows how the rise of antiestablishment parties around Europe can lose steam if populists struggle to implement promised radical changes.

Greek voters have turned to Mr. Mitsotakis to take the country in a new direction after years of slow, grinding economic recovery. Syriza met creditors’ tough fiscal targets, but mainly by raising taxes to a level that most economists say is harmful for growth.

“The citizens have made their choice. We fully respect the popular vote,” Mr. Tsipras said in a speech Sunday night. “I want to reassure the Greek people that we will be here present in opposition to protect their interests.”

Mr. Mitsotakis, a 51-year-old U.S.-educated former banker, campaigned for lower taxes, less bureaucracy and making Greece friendlier for business. He has promised to double the pace of Greek economic growth to 4 percent, and to quickly unblock investments held up by Syriza’s ambivalence toward foreign capital.

His challenges include the still-stringent fiscal targets agreed upon with other eurozone governments, whose bailout loans kept Greece afloat during its debt crisis. Germany and other lenders want Greece to continue running a budget surplus, excluding interest, of 3.5 percent of gross domestic product, despite the depressed state of the country’s economy. Greek GDP is still 24 percent below its precrisis peak.

Mr. Mitsotakis says he will seek to persuade other European countries to relax Greece’s fiscal targets, on the basis that he will deliver higher growth. Berlin and other European capitals have in the past been reluctant to relax Greece’s targets.

Further constraining Mr. Mitsotakis’s room to maneuver, European creditors and Greece’s central bank have warned that the budget might already be off course, after a round of pre-election giveaways by the departing Syriza government.

Greece’s jungle of vested interests in the public and private sectors also presents a formidable obstacle to a more dynamic economy. Many of New Democracy’s old guard are also skeptical about Mr. Mitsotakis’s free-market agenda. A strong final result in Sunday’s elections is expected to boost his authority in the party.

Europe’s wider economic slowdown could also make it harder to reinvigorate growth. Greece’s junk-level credit rating means it wouldn’t ordinarily be eligible for bond purchases by the European Central Bank, if the ECB steps up its monetary stimulus.

Greece completed its bailout in 2018, after spending eight years under an austerity regime overseen by eurozone authorities and the International Monetary Fund. After suffering the deepest depression in a developed country since the 1930s, Greece’s economy is finally growing, but at a pace of only around 2 percent. Without a better growth trajectory, Greece would reach its precrisis level of GDP only in 2033, according to consulting firm Oxford Economics.

Mr. Mitsotakis will be sworn in as prime minister on Monday and will announce his new cabinet later in the day. The new government could be sworn in as early as Tuesday.

New Democracy officials say the new government will enact legislation quickly to simplify the tax system, cut red tape and make the Greek state leaner and more efficient.

Financial markets have reacted enthusiastically to the prospect of a conservative government since Mr. Tsipras called snap elections in May. Greek bond yields have plummeted to around 2 percent, from 3.5 percent two months ago, while the Greek stock market has rallied for weeks.

One of the new entries in Parliament is MeRA25, a party founded by Mr. Tsipras’s former finance minister, Yanis Varoufakis, who became a global celebrity at the height of Greece’s debt crisis.

“Greece, the country of the bailouts, closes a chapter and opens another, which I’m afraid will be even darker,” said Mr. Varoufakis, whose party was set to win nine seats. “From tomorrow, we start an uncompromising struggle against whatever New Democracy is preparing.”

CLICK HERE TO GET THE FOX BUSINESS APP

The fascist Golden Dawn, which became Greece’s third-biggest party in the depths of the crisis, was set to fall just short of the 3 percent needed to make it into Parliament, initial results showed.

Another far-right party, Greek Solution, was set to win 10 seats. Its leader, Kyriakos Velopoulos, campaigned on a law-and-order platform that includes planting mines along the border with Turkey and bringing back the death penalty for smugglers.

Write to Nektaria Stamouli at nektaria.stamouli@wsj.com