Greek President Meets Parties in Bid for Unity Government

Greek President Karolos Papoulias began meeting with the leaders of the country’s three biggest parties in a final bid to coax them into a coalition that would avert new elections and damp concern about a euro-area exit.

Papoulias is in talks with the leaders of the New Democracy, Syriza and Pasok parties, each of which failed to deliver on mandates to form governments in the past week. He will then meet the leaders of the four other parties with the aim of forming a national-unity government. If Papoulias’s efforts today fail, new elections will need to be called.

“The Greek people didn’t just give us a message, they gave us a mandate,” said Antonis Samaras, head of New Democracy, the biggest party, following the elections of May 6. “That was a message for the cooperation of all of us, for a change in policy but to remain in the euro.”

Greece’s political impasse since the inconclusive general elections has raised the possibility another vote will have to be held as early as next month, with polls showing that could boost anti-bailout party Syriza to the top spot. The standoff has reignited concern the country will renege on pledges to cut spending as required by the terms of its two bailouts negotiated since May 2010, and, ultimately, leave the euro area.

Returned Mandate

Evangelos Venizelos, the socialist Pasok leader, returned the third, and final, mandate to Papoulias yesterday, after Alexis Tsipras, the leader of Syriza, turned down an appeal by the smaller Democratic Left party to join a coalition.

Pasok, New Democracy and Democratic Left had earlier agreed on the broad outlines for a government would last until 2014 and be committed to keeping the country in the euro region and renegotiating bailout conditions from the International Monetary Fund and European Union to boost growth.

Tsipras turned down the approach on May 11 as the first opinion polls since the elections showed he was gaining in support.

Syriza would come in first, though short of an outright majority, with 20.5 percent of the vote, if elections were held again, according to a Kapa Research poll for the newspaper To Vima, released yesterday. It got 16.8 percent in the May 6 election. Support for New Democracy would fall to 18.1 percent from 18.9 percent and Pasok would drop to 12.2 percent from 13.2 percent, according to the survey.

Concessions Wanted

The poll showed 78 percent of Greeks want the government to do whatever possible to keep Greece in the euro area and that 72 percent want political parties to make concessions to form a coalition, compared with 22.9 percent who want new elections. Kapa surveyed 1,007 Greeks May 9 and 10. The poll had a margin of error of 3.1 percentage points.

New Democracy and Pasok, the two parties that supported the international rescue in an interim government earlier this year, are two deputies short of the 151 seats needed for a majority in the 300-seat chamber. Five parties opposed to the bailout conditions are now in parliament.

Tsipras failed to reach an accord with other leaders after giving them an ultimatum to renounce support for the EU-led rescue in order to enter the government. Samaras, whose party finished first, gave up trying to forge a coalition after six hours of talks on May 7.

Euro Exit Risk

Tsipras demanded that Samaras and Venizelos, the former finance minister, revoke their written pledges to implement austerity measures. Both rejected the request.

More than half of investors predict one of the nations in the euro area will exit the currency bloc this year as Greece’s election impasse threatens to push the European debt crisis to new depths, according to a Bloomberg Global Poll on May 10.

A Greek departure from the euro could be “technically” managed yet would damage confidence in the monetary union, European Central Bank Governing Council member Patrick Honohan said yesterday.

“It is not necessarily fatal, but it is not attractive,” Honohan told a conference in the Estonian capital, Tallinn.

Greece will run out of cash by early July if partners decided to withhold their next aid payment. The European Financial Stability Facility on May 9 confirmed that a 5.2 billion-euro ($6.7 billion) tranche will be released by the end of June, with 4.2 billion euros disbursed May 10. The remaining 1 billion euros will be released depending on Greece’s financing needs.

Bailout Terms

Under the terms of the bailout, a new government will need to spell out how it will save of 11 billion euros next month.

Fitch Ratings said in a report on May 11 that the outcome of another election would be “unpredictable” and “make it doubtful that Greece could comply with the EU-IMF’s end-June deadline to propose further medium-term austerity measures.”

While Greece would probably be granted an extension to that deadline, any attempt to significantly renegotiate its program would be unacceptable to the so-called troika of the European Commission, IMF and European Central Bank, Fitch said.

“The impression from this week’s unfruitful negotiations on the formation of a new government is that Greek political parties have taken the view that new elections in June are the only way out,” Riccardo Barbieri, chief European economist at Mizuho International Plc said in a note to investors on May 11. “If new elections are called, they will indeed amount to a referendum on staying in the euro.”

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Paul Tugwell in Athens at ptugwell1@bloomberg.net

To contact the editors responsible for this story: Jerrold Colten at jcolten@bloomberg.net To contact the editors responsible for this story: Tim Quinson at tquinson@bloomberg.net

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Greek President to Tackle Political Imbroglio as Elections Loom

PHotographer: Kostas Tsironis/Pool/AFP/Getty Images

Greek President Karolos Papoulias, right, with Greek leader of the Coalition of the Radical Left party (Syriza) Alexis Tsipras to formally give him the mandate to form a coalition government in Athens on May 8, 2012. PHotographer: Kostas Tsironis/Pool/AFP/Getty Images

Greek President Karolos Papoulias, right, with Greek leader of the Coalition of the Radical Left party (Syriza) Alexis Tsipras to formally give him the mandate to form a coalition government in Athens on May 8, 2012. PHotographer: Kostas Tsironis/Pool/AFP/Getty Images

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May 11 (Bloomberg) -- Andrew Lilico, director and principal of Europe Economics, talks about Greece's political turmoil and euro-zone membership. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)