Greece faces new elections as left refuses to join austerity coalition
Greece’s socialist leader admitted Friday he had failed in a last-ditch bid to form a government, taking the nation a step closer to repeat elections amid intense EU pressure over its finances.
Pasok chief Evangelos Venizelos’s announcement came after the key radical leftist party Syriza refused to join a pro-austerity coalition with the socialists and conservatives, paving the way for weekend talks hosted by the president to try to stitch together an emergency unity government.
The latest twist in the tortuous political drama came as EU paymaster Germany threatened to cut off the country’s loan lifeline and hinted that the crisis-ridden eurozone could get along without Greece.
Venizelos was the third party leader who tried and failed to cobble together a government after inconclusive elections on Sunday that saw a backlash against painful austerity measures which have triggered sometimes violent protests.
“I am going to inform the president of the republic tomorrow (Saturday) and I hope that during the meeting with Carolos Papoulias, each party will assume its responsibilities,” Venizelos told reporters in Athens.
If the parties cannot agree a compromise by Thursday, new elections will have to be called.
Venizelos had been hoping to win the support of Syriza, a party deeply opposed to the terms of the 240 billion euro (311 billion dollar) EU-IMF bailout and which surged to second place in Sunday’s vote.
“It is not Syriza which is rejecting (joining a coalition with the socialists and conservatives) but it is the verdict of the people of Greece,” said party chief Alexis Tsipras.
Earlier, another possible ally, the small Democratic Left party, said it would not join a government made up of only Pasok and the conservative New Democracy party that did not include Syriza.
Earlier this week both Tsipras and New Democracy leader Antonis Samaras failed in their own attempts to assemble a coalition government.
German leaders warned Friday that Athens could expect no more money without reforms and also suggested that the eurozone would cope if the cash-strapped country left the 17-member currency union.
Greece has already committed to finding in June another 11.5 billion euros in savings over the next two years. It also needs to redeem 436 million euros in maturing debt on May 15.
The political deadlock saw the Athens stock exchange plunge 4.5 percent on Friday after closing up 4.19 percent on Thursday. Over the week Greek markets lost 11.3 percent.
With Greek reforms already on hold because of the election campaign, Brussels on Friday revised downwards its economic forecasts for the country at the epicentre of the eurozone debt crisis.
The European Commission said the economy is expected to contract by 4.7 percent this year — compared to a Greek budget estimate of 2.8 percent — and see zero growth next year.
It also cast doubt on Greek pledges to reduce the public deficit to 7.0 percent of gross domestic product this year, favouring a 7.3-percent estimate instead.
Sunday’s election punished the mainstream parties for their insistence on crippling austerity measures introduced to meet the terms of the bailout and alarmed Greece’s eurozone partners amid fears vital reforms may be at risk.
Even the pro-bailout parties have publicly called for a revision of Greece’s EU-IMF loan agreement.
Samaras on Friday repeated his assertion that the deal must be “modified” to boost growth after five years of recession.
But the EU has warned that Greece must honour the bailout conditions of budget cuts and deep reforms.
Papoulias said Friday Greece was counting on its partners’ solidarity in the crisis which “no doubt has a European dimension”.
Earlier in the week, the eurozone announced it was blocking 1.0 billion euros ($1.3 billion) out of 5.2 billion euros in bailout loans until Monday.
“We want Greece to remain in the eurozone,” German Finance Minister Wolfgang Schaeuble told the regional Theinische Post in an interview published Friday. “But it also has to want this and to fulfill its obligations. We can’t force anyone. Europe won’t sink that easily.”
German Foreign Minister Guido Westerwelle warned Athens could expect no more money without reforms.
“We want to help Greece and we will help Greece. But Greece has to want to be helped. If they deviate from the agreed reform path, then the payment of further tranches of aid is not possible.”
Fitch credit rating agency warned that the emergence of a Greek government “unwilling or unable to abide by the terms of the current EU-IMF programme would increase the risk of Greece leaving the eurozone”.
“If they are required, the re-run elections will therefore be a critical event for both Greece and for the eurozone,” it said in a note.
An opinion poll published Friday showed that Syriza could even emerge as the victor if new elections are held in June.
AFP Photo/Louisa Gouliamaki