May 8 (Bloomberg) -- Greek political leaders are meeting for a second day to try to form a government after New Democracy’s Antonis Samaras failed to forge an agreement following an election that raised questions about the nation’s euro membership.
Samaras gave up his bid after almost six hours of talks in Athens yesterday. The attempt to form a government will pass to Alexis Tsipras, the head of Syriza, the second-biggest party, which has vowed to renegotiate the terms of international aid for Greece. Tsipras will see President Karolos Papoulias today at 2 p.m.
“I tried to form a coalition government with two goals: that the country remain in the euro and bailout policies change to include growth measures,” Samaras said in a statement on state-run NET TV yesterday. “I did what I could to get a result but it was not possible. As such, I have informed the president of the republic and handed back the mandate.”
Samaras had been given three days to put together a coalition in a Parliament split down the middle on whether to renege on the terms of the two bailout agreements negotiated since May 2010. New Democracy and the socialist Pasok party, rivals until the country’s crisis made them partners in a national government last year, are two seats short of the 151 seats needed for a majority in the chamber.
New Democracy Leads
New Democracy led in the election, receiving 19 percent of the vote and 108 seats in the 300-seat Parliament. Syriza got 17 percent to score 52 seats; Pasok came third with 13 percent and 41 seats.
As voters across Europe rebel against austerity measures imposed to stamp out the debt crisis, Citigroup Inc. said yesterday the risk of Greece leaving the euro by the end of 2013 has risen as high as 75 percent. The election on May 6 propelled into Parliament a party that wants to put land mines on the border with Turkey and another that wants Germany, the country’s biggest donor, to pay World War II reparations.
The benchmark ASE Stock index fell 0.5 percent today at 11:00 a.m. in Athens after plunging 6.7 percent yesterday, its biggest drop in six months. The Stoxx Europe 600 Index fell 0.2 percent. The euro was down 0.2 percent to $1.3029.
Greece plans to sell 1 billion euros ($1.3 billion) of 26-week Treasury bills today, according to a May 4 statement by the Greek Debt Management Office. Acting Greek Finance Minister Filippos Sachinidis declined to comment on the country’s cash reserves when contacted by Bloomberg News yesterday by phone.
Samaras got his first rebuff from Tsipras, who repeated his plans to forge a coalition of leftist parties that will overturn the bailout policies. He said Samaras’s endorsement of the second rescue package for Greece this year and the austerity measures are “policy positions opposite to the left’s alternative plan for cooperation.”
“There cannot be a government of national salvation, as he calls it, since the signatures and his commitments are not salvation, but tragedy for the people and the place,” Tsipras said in a statement after the meeting.
Pasok leader and former Finance Minister Evangelos Venizelos repeated his call for a national unity government in which all pro-European parties would join and which could begin talks with international lenders on relaxing bailout terms.
Democratic Left, which won 19 seats in Parliament and rejects austerity measures yet is in favour of remaining in the euro, said it planned to listen to all approaches before taking a position.
Quit the Bailout
“Our election pledge is clear: a government of wide popular legitimacy which must secure Greece’s place in the euro area and to proceed with disengagement from the bailout,” Fotis Kouvelis, the Democratic Left leader, said after meeting Samaras. “Each political party must define its stance on these two points.”
Independent Greeks leader Panos Kammenos declined to meet with Samaras, NET TV reported, without saying where it got the information. Kammenos’s party secured 33 seats in the parliament. Communist Party of Greece chief Aleka Papariga, which wants to withdraw from both the European Union and NATO also refused to meet Samaras. Samaras didn’t approach Golden Dawn, the far-right anti-immigrant nationalist party.
The pro-bailout camp of New Democracy and Pasok has neither the seats nor political legitimacy, since they only got 32 percent of the vote, to form a new government and “the search for a third partner is very likely to fail,” Wolfango Piccoli, an analyst at Eurasia Group in London, said in a note.
“Greece is unlikely to have a strong, stable government any time soon, raising political uncertainty and potentially putting its bailout at risk,” Piccoli said.
If Tsipras also fails to get the necessary number of seats, the onus on forming a government will pass to Pasok. Each mandate can last for three days.
If the process fails to yield a coalition, President Papoulias must try to broker a government of national unity, the constitution says. If that process fails, the Greek constitution stipulates that new elections are to be held.
Greek elections were held amid unemployment of almost 22 percent and a jobless rate of almost 51 percent for those under the age of 24.
European taxpayers now hold the bulk of the country’s debt, meaning governments may have little option but to keep the country’s finances afloat.
Of Greece’s 266 billion euros of debt, about 194 billion euros, or 73 percent, is held by the European Central Bank, euro-area governments and the IMF, according to the Greek Debt Management Office in Athens. In 2010, before the first bailout, Greece owed about 310 billion euros, all to the private sector.