Greece calls new elections after talks collapse
Greece
abandoned a nine-day hunt for a government on Tuesday and called a new
election that may hand victory to leftists who might cut the nation's
financial lifeline, pushing it closer to bankruptcy and out of the euro
zone.
After
six rounds of fruitless wrangling, party leaders emerged from a final
session at the presidential mansion to gloomily declare that deep
divisions over a 130-billion-euro foreign bailout package had killed any
hope of a coalition deal.
"We
shouldn't have reached this point," said Socialist leader Evangelos
Venizelos, who personally negotiated the rescue package from the
European Union and IMF which the hard left says has imposed too harsh an
austerity regime. "For God's sake, let's move towards something better
and not something worse."
Reviled
for imposing deep wage and spending cuts but vital to keep the country
running, the bailout worth $166 billion prompted Greeks to elect the
most fragmented parliament in decades on May 6, giving no party or bloc a
clear mandate.
A
second election is expected to produce a similarly divided legislature,
but the balance of power is seen tipping towards opponents of the
EU/IMF rescue and raising the likelihood of a coalition that reneges on
the deal keeping Greece afloat.
That
would almost certainly mean the end to aid from foreign lenders,
leaving Greece without cash as early as next month and paving the way
for its eventual exit from the euro zone.
Greeks
who showed their fury against spending cuts by humiliating the
long-dominant Socialist and conservative parties earlier this month must
now choose between the pain of austerity and an even more painful
return to the drachma currency.
"Much
depends on whether the Greek people in this repeat election are going
to vote with anger and passion or if they will cool off, reflect and see
in effect what the real choices are," said Theodore Couloumbis, analyst
at the ELIAMEP think-tank. "The choice is between bad and worse."
Financial
markets, worried that a Greek euro exit could spread turmoil to bigger
euro zone economies such as Spain and Italy, tumbled on the news. The
euro fell to a four-month low against the dollar, while Italian and
Spanish bond yields rose. Greek stocks fell 5 percent to a 20-year low
before paring losses. They closed down 3.6 percent.
YES TO EURO, NO TO DEVASTATION
A
compromise to produce a government that might save the country from
further financial calamity proved elusive; the three biggest parties in
the newly elected parliament each failed to form a coalition last week
and three additional rounds of talks mediated by the president ended
without result.
Dejection
was visible on the faces of the five party leaders who sat down to
talks on Tuesday. The far-right Golden Dawn was not invited, while the
anti-euro Communists did not show up. A tense meeting ensued, sources
from two parties said.
After
barely two hours, the politicians threw in the towel. A spokesman for
President Karolos Papoulias summoned reporters to announce a new
election and plans to form a caretaker government on Wednesday. The vote
is expected in mid-June.
Almost immediately, Greek party leaders were in front of cameras and supporters in spirited pre-election campaign mode.
Conservative
leader Antonis Samaras, whose push for early elections backfired and
left him without enough support to renew his pro-bailout coalition with
the Socialists, appeared distraught as he made his appeal to voters to
back him.
"The message you sent is clear: 'Yes' to the euro, 'No' to those policies which devastate the Greek people," said Samaras.
Polls
show the leftist SYRIZA party, which rejects the bailout and came
second behind Samaras's New Democracy, is now on course to win a new
election, a result that would give it an automatic bonus of 50 seats in
the 300-seat parliament.
The
party's charismatic 37-year-old leader, Alexis Tsipras, has soared in
popularity by promising Greeks a future in the euro zone without the
yoke of austerity - horrifying European leaders who say the country
cannot have its cake and eat it too.
"If
we have any hope today it is because all together we took a big step on
May 6. Now it's time to conclude it," said Tsipras, a handsome,
ex-Communist student leader who burst into the political mainstream
after this month's shock vote.
"The
time has come to form a government of the Left, with wide support, and
put an end to the these policies that destroy this country."
"NO ALTERNATIVE"
The
prospect of new elections has left European lenders which have bailed
Greece out twice close to despair. Senior European Commission officials
held urgent talks on Tuesday to work through the fallout from a second
Greek election.
"We
are really at a critical juncture," one official taking part in the
discussions said. "The decisions are really in Athens' hands. But it
doesn't look good."
As
French President Francois Hollande flew to Berlin to meet German
Chancellor Angela Merkel for crisis talks on the very day he was sworn
in, Merkel's foreign minister, Guido Westerwelle, called the failure in
Athens a "bitter blow" to trust in Greece.
"What
Greece needs now is dependability and the will to reform to help it get
over the mountain, in close collaboration with its European partners,"
he said. "The reforms to achieve this are hard and painful but they are
the only way back to growth and competitiveness. There is no
alternative."
Even
if European lenders were to cut Greece some slack on its austerity
commitments, there is no government in place to negotiate a next tranche
of aid - and no guarantee there will be one before Greek cash coffers
run empty.
Greece's
predicament is hardly new. The country has lurched from one crisis to
the next over the past two years and is now enduring its fifth year of
recession. Nearly one Greek worker in five has no job. Protests, riots
and highly public suicides have become commonplace in a sharply volatile
social climate.
Initially
exultant at having humbled their political class in this month's vote,
Greeks are now increasingly worried the country is on a path of no
return.
"The country is finished," said Panos Leonidas, 57, a travel agent. "From now on, you can only live here if you're an animal."
