Greek Elections Loom as Key Bailout Opponent Defies Unity

Greece’s political deadlock went into a second week as President Karolos Papoulias failed to secure agreement on a unity government and avert new elections with the country heading toward a possible exit from the euro area.

Greece’s biggest anti-bailout party, Syriza, defied overtures to join the government yesterday, deepening the impasse. Leader Alexis Tsipras won’t attend a meeting called by Papoulias today at 7:30 p.m. Athens time, the party said in an e-mailed statement.

“Syriza won’t betray the Greek people,” Tsipras said in statements televised on NET TV after meeting with Papoulias and the leaders of the New Democracy and Pasok parties. “We are being asked to agree to the destruction of Greek society.”

Papoulias spent yesterday trying to coax the country’s three biggest parties into a coalition after a week of talks failed to deliver a government. If Papoulias’s efforts fail, new elections will need to be called. Today’s meeting will be with the leaders of two of the three biggest parties, and the head of the smaller Democratic Left party, state-run NET TV said.

“We’re here to exhaust all the possibilities” to form a government, Antonis Samaras, the leader of New Democracy, said as he arrived for the meeting.

Another Vote

Greece’s political impasse since the inconclusive May 6 election has raised the possibility another vote will have to be held as early as next month, with polls showing that could boost anti-bailout 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.

Pasok, New Democracy and Democratic Left agreed last week on a government that 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. Syriza’s Tsipras turned down the approach on May 11 as the first opinion polls since the elections showed he was gaining support.

Democratic Left has said that Syriza, the second-biggest party, must be part of its proposed unity government, or give it tacit support at least, if the government is to succeed. The position has been adopted by Pasok and New Democracy.

Shares Fall

The ASE Index dropped 4.6 percent to 584.04 at the Athens close today, its lowest level since November 1992. The benchmark measure fell 11 percent last week. Opap SA, Europe’s largest listed gambling company, plunged 12 percent to 5.15 euros, its biggest drop in over seven months.

The euro dipped 0.2 percent to 1.2847 as of 12:42 p.m. in New York, its lowest level in four months, before euro-area finance ministers convene in Brussels today.

German Finance Minister Wolfgang Schaeuble said Europe has done the “utmost” to prop up the financially stricken country, limiting any further room for leniency after about 240 billion euros ($308 billion) of aid pledges.

“There’s no easy way for Greece, whatever the outcome will be,” Schaeuble told reporters before a meeting of the ministers in Brussels. “It’s not about the question of being more or less generous toward Greece. It’s simply about what is still economically justifiable, what can be done that’s still convincing in economic terms, that still has credibility.”


Europe must reexamine its policy of austerity and acknowledge it has failed, Tsipras said today in an interview broadcast live on state-run Athens News Agency’s website.

“We ask that our country remain in the euro without the catastrophic policy of austerity and we have the solidarity of Europe,” Tsipras said. “I can’t guarantee that the euro area itself and the euro will be united and exist.”

Yesterday, Tsipras challenged the three pro-bailout parties to go ahead with forming a government, saying they would lack legitimacy.

“The three parties that have agreed on the policy framework for a two-year government to implement the memorandum have 168 lawmakers in the new parliament,” which has 300 deputies, he said. “They have the majority so let them proceed. Their demand for Syriza to join their planned agreement is illogical.”

Syriza Poll Lead

Opinion polls conducted since the elections suggest that Syriza would come in first in a rerun, though short of an outright majority. Syriza would have 20.5 percent of the vote if elections were held again, according to a survey of 1,002 people by Rass SA for the newspaper Eleftheros Typos on May 14, the fourth poll to show the party with such a lead.

That survey showed support for New Democracy, which placed first in the May 6 election, at 19.4 percent and Pasok dropping to 11.8 percent from 13.2 percent in the election. More than eight in 10 said they wanted Greece to remain in the euro area. The poll was conducted on May 10 and May 11. No margin of error was given.

The May 6 election resulted in New Democracy and Pasok, the two parties that supported the international rescue in an interim government this year, being two deputies short of the 151 seats needed for a majority in Parliament. Syriza came in second, its best showing ever and a fourfold increase in support from the 2009 elections. Five anti-bailout parties are now represented in parliament.

No Agreement

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. Both Samaras and Evangelos Venizelos, the former finance minister, rejected the request.

Party leaders said they were given a note on the state of the economy by interim Prime Minister Lucas Papademos during their meetings with Papoulias yesterday. Ta Nea reported that the letter said the state will find it difficult to cover payments in June due to the political impasse and the holding back of the 1 billion euros. The newspaper didn’t say how it got the information.

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

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