(Reuters) – Greek politicians were set to abandon their
quest to form a government on Saturday, leaving the president with one final chance to avert new
elections that could drive Greece out of the European single
currency.
Socialists PASOK party Evangelos Venizelos (R) meets leader of Conservatives New Democracy party
Antonis Samaras in Athens May 11, 2012. REUTERS/Yorgos Karahalis
Greece’s political landscape is in disarray after voters humiliated the only
parties backing a rescue plan tied to spending cuts, leaving no bloc with sufficient seats to form a
government to secure the next tranche of financial aid.
Without the aid, the debt-stricken
country risks bankruptcy in weeks and – as European leaders now openly acknowledge – potential ejection
from the euro
zone.
The prospect of a new election has caused havoc in financial markets, both in Greece
and across Europe, where the idea that Athens might leave the euro is viewed as potentially damaging to
bank balance sheets and the credit ratings of other vulnerable countries.
On Friday, as
politicians acknowledged their failure to agree a coalition, the euro sank to its lowest point since
January near $1.29.
Opinion polls conducted in the week since the election show the SYRIZA
coalition of charismatic 37-year-old radical leftist Alexis Tsipras surging into the lead.
He
says the bailout deal must be torn up, though like most Greeks he says he still wants to keep the euro,
a position which is seen in Brussels as untenable without the bailout’s austerity
commitments.
On Friday, Tsipras rejected an offer to form a unity coalition of all parties, a
proposal made by Socialist leader Evangelos Venizelos – the outgoing finance minister who negotiated the much-hated 130
billion euro bailout package with lenders.
Venizelos, the third political heavyweight to fail to
form a government in the week since the election, is due to meet President Karolos Papoulias at 1000
GMT on Saturday to give up his mandate.
Papoulias will then meet the leaders of all parties in
parliament and try one last time to persuade them to create a government or, if they cannot, to call a
new election, expected in mid-June.
Newspapers suggested on Saturday that Papoulias would wait
until Monday to summon the politicians, leaving Greece and anxious watchers in the euro zone in limbo
for now.
HUMILIATION
Last Sunday’s election saw the two parties that dominated the
country for generations – Venizelos’s PASOK and the conservative New Democracy party of Antonis
Samaras – humiliated.
The two, which together usually hovered up around 80 percent of votes, saw
their combined vote tally collapse to just 32 percent. The rest of the votes were won by small parties
that oppose the bailout, ranging from the Communists to the far right.
Polls taken since then
show the anti-bailout vote consolidating around Tsipras, whose good looks and self confident manner
have helped make him a hero for young people.
Without their bailout deal in place, Venizelos and
Samaras warn that Greece is headed for certain ejection from the euro and bankruptcy. If a second
election does take place, they will be hoping that frightened voters return to the traditional
parties.
But the momentum is clearly behind Tsipras in a country where more than half of young
people are now unemployed. The two main parties’ middle-aged leaders are widely loathed as
incompetent, self-interested and out of touch.
A cartoon on the front page of the Ta Nea
newspaper showed the boyish Tsipras riding off with the ballot box on a toy horse.
A poll by
Metron Analysis for the Epenenditis weekly published on Saturday showed SYRIZA would take 25.5 percent
of votes – almost 9 points higher than its Sunday result. A poll earlier this week gave SYRIZA 27.7
percent.
Both results would put it way ahead of New Democracy and PASOK, and give Tsipras a
bonus of an extra 50 seats in the 300-seat parliament for coming first.
The bailout requires
Greece to cut wages, raise taxes, fire state employees, sell off state assets and restructure labor
laws. EU leaders say it is necessary if Greece is ever to become solvent.
But opponents say the
harsh medicine is self-defeating, making it impossible for Greece to grow its economy and emerge from
the depths of the euro zone’s worst recession, which has ground on relentlessly for five
years.
SYRIZA argues that Greece can abandon the bailout and that European leaders will not
carry out their threats to withhold funding, because they cannot risk the damage to other EU countries
that would be caused by a Greek collapse.
“They will be begging us to take the money,” SYRIZA
deputy Dimitris Stratoulis said on Friday.
But European leaders say the next tranche of loans
due in late June is in jeopardy if Greece does not emerge with a government committed to the bailout
package.
If a second election is held, voters will be given a stark choice, said Chris
Williamson, chief economist at London-based research firm Markit.
“I think it is going to be
increasingly presented as a vote to effectively leave the euro. That’s how it will be seen outside of
Greece and the rhetoric will build up to ensure that voters are aware of the
implications.”
(Additional reporting by Karolina Tagaris; Writing by Peter
Graff; Editing by Andrew Osborn)