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Greece hurtles towards new election; hard left leads

11 May 2012 20:20 (UTC +04:00)

Baku-APA. The leaders of Greece’s once-dominant conservative and socialist parties made a push on Friday to avert new elections and prevent a victory by a radical leftist who has promised to tear up its international bailout deal, APA reports quoting Reuters.

The majority of Greeks want to stay in the euro zone but voted last Sunday for parties that reject the severe terms of the bailout negotiated with the European Union and IMF. European leaders say they want Greece to stay in the common currency but funding for it to avoid bankruptcy will end if it turns its back on the package of tax increases and wage cuts.

Socialist PASOK leader Evangelos Venizelos, whose party once towered over Greek politics but was a distant third in Sunday’s election, is the last politician in the line to try to form a government.

He met conservative rival Antonis Samaras, whose New Democracy party came first in the election but who has already failed to form a coalition. If Venizelos fails as well, all parties will have one last chance to try before a new election must be held in mid-June.

A new vote could be catastrophic for Samaras, whose party benefited on Sunday from a rule that gives 50 bonus seats in the 300-seat parliament to the group that comes first.

Samaras stands to lose those seats to the hard left SYRIZA coalition of Alexis Tsipras - wiping out nearly a third of parliament’s pro-bailout contingent and making it inconceivable that the next government would commit to the austerity package.

The prospect of a new vote rattled financial markets. The European single currency hit its lowest point since January, while the Athens stock exchange fell more than 4 percent on Friday, hitting its lowest level since 1992.

"The stock market is hitting lows because of the political deadlock, with buyers holding back. As long as the uncertainty persists, the market will not have a reason to rebound," said Theodore Krintas, head of wealth management at Attica Bank.

After meeting Venizelos, Samaras insisted there was still hope of heading off a new election.

"We are fighting to form a government and there are still hopes for this," he told lawmakers from his party.

PASOK and New Democracy jointly negotiated the 130 billion euro ($168.5 billion) EU/IMF bailout in a coalition and now are the only parties in parliament that support it.

They say the bailout saved Greece from bankruptcy, but most of the public believes its harsh conditions make it impossible to resume economic growth and emerge from a fifth year of recession that has profoundly worsened the quality of life.

Enraged voters punished PASOK and New Democracy by reducing their combined share of the vote from 77 percent to 32 percent at last Sunday’s election. Even with New Democracy’s 50 bonus seats they were two seats short of forming a coalition.

Samaras and Venizelos may be hoping Greeks - frightened by the prospect of a hasty exit from the euro - will return to their traditional parties in a re-run of the election.

But the first opinion poll since the election showed the main beneficiary of a new vote would be Tsipras, a 37-year-old ex-Communist civil engineer and former student leader, who demands the bailout be torn up.

His boyish charisma has made him a star for young Greeks fed up with the middle-aged major party dynasts who are widely condemned as out of touch, self-serving and corrupt.

The poll showed SYRIZA would win with 27.7 percent of the vote, almost 11 points up on its Sunday result, consolidating votes from smaller anti-bailout groups.

If SYRIZA were to win the 50 bonus seats for first place, the marginalization of once-mighty parties that ruled Greece for decades would be complete, and their bailout a dead letter.

"READY TO FIGHT"

Venizelos’s hopes of reaching a last-ditch deal have rested with the Democratic Left party, a small moderate group.

But its leader, Fotis Kouvelis, insisted on Friday he would not join a coalition with the pro-bailout parties alone. He has called for a coalition of all parties - including SYRIZA - which would "gradually disengage" from the bailout deal.

Samaras said Kouvelis’s proposal for an all-party government was not far from his own position. But it is hard to see SYRIZA agreeing to join it unless it decisively repudiates the bailout, especially with polls showing Tsipras favored in a new vote.

Kouvelis acknowledged as much: "If SYRIZA doesn’t change its stance we will head to elections. We didn’t want these elections, we did everything we could and even more to avoid them. But if there are elections, we are ready to fight."

SYRIZA deputy Panagiotis Lafazanis told Greek radio any hope the leftist party would agree to join a broad government was "wishful thinking" and such speculation was a farce.

Ratings agency Fitch said a new election was now "probable", although its outcome was difficult to predict. The emergence of a government that disavowed the bailout terms would increase the chance of Greece leaving the euro zone, an event that would put the credit ratings of all euro countries at risk, it added.

Greece could run out of money as soon as the end of June when the IMF and EU are due to grant it the next 4 billion euro installment of their loan package. The lenders say they will not give Athens the money unless it has a government in place that renews its commitment to the deal, although Fitch said it believed that deadline could be extended.

A senior SYRIZA party official said European leaders were bluffing by questioning Greece’s future in the euro.

"They will be begging us to take the money," Dimitris Stratoulis said of the bailout, adding that a Greek exit would trigger the collapse of the single currency.

The prospect that Greece might declare bankruptcy and leave the euro caused panic across the euro zone last year. Since then, European banks have written off the value of most of their Greek debt, making them less prone to shock if Greece defaults.