Greek election impasse heralds lengthy instability
ATHENS, GREECE
Greece faces weeks of political turmoil that could scupper its financial bailout and threaten its membership of the euro, after voters relayed the full force of their anger over crippling income cuts by punishing mainstream politicians in a general election that's let a far-right extremist group into Parliament.
With no party able to govern alone, Conservative leader Antonis Samaras, whose pro-austerity party came first in national elections but fell well short of a ruling majority, is now trying to form a new coalition government. Samaras has three days in which to build an alliance, after receiving the formal mandate from President Karolos Papoulias Monday.
But his chances are slim, and another election, probably next month, looms for a debt-shackled nation that is reliant on international support to avoid bankruptcy.
Initial exploratory talks with Alexis Tsipras, the 38-year-old head of the second-placed Radical Left Coalition party, or Syriza, failed. It now appears highly unlikely that anybody -- either pro- or anti-austerity -- will be able to forge a new government that will command a majority in Parliament.
"The campaign positions of Mr. Samaras are at the opposite end of the alternative proposals of a left-wing government," said Tsipras, who strongly opposes Greece's bailout commitments.
He said he would not back a coalition with the conservatives, as Samaras' backing for Greece's bailout agreement constitutes "a tragedy for the people and the country."
Socialist PASOK, which came a humiliating third, two and a half years after a landslide election victory, expressed willingness to join in a coalition and that it would not demand government positions. Party leader Evangelos Venizelos, who as finance minister negotiated Greece's second bailout and a massive debt relief deal, said Syriza and a smaller left-wing party should be involved in any new government.
"It is necessary for the government of national unity to include all the forces that have a pro-European outlook," Venizelos said after meeting Samaras. "The minimum level of agreement is that Greece remains in the euro."
If Samaras' efforts fail, the mandate to form a government will pass on to Tsipras and then to Venizelos. Each will have three days to form a coalition.
Sunday's vote saw parties backing the draconian international rescue package lose their majority in parliament -- raising the chances of a possible Greek exit from the common euro currency. Samaras backs Greece's bailout commitments for austerity but has called for some changes to the bailout plan.
The uncertainty weighed on markets across Europe, with the Athens exchange closing 6.7 percent down.
Official results showed New Democracy came first with 18.85 percent and 108 of Parliament's 300 seats. But even with the support of the only other clearly pro-bailout party elected, PASOK, New Democracy would fall two seats short of a governing majority
"I understand the rage of the people, but our party will not leave Greece ungoverned," Samaras said.
If the deadlock does not ease, Greece faces new elections under a caretaker government in mid-June, about the time it has to detail new drastic austerity measures worth (EURO)14.5 billion ($19 billion) for 2013-14.
In June, Athens is also due to receive a (EURO)30 billion ($39.4 billion) installment of its rescue loans from the other countries in the 17-strong eurozone and the International Monetary Fund. If aid is cut off, analysts at Commerzbank estimated, the country would have trouble paying its debts by autumn.
German Chancellor Angela Merkel said Athens would still be expected to live up to its agreements.
"Of course the most important thing is that the programs we agreed with Greece are continued," she said.
Her remarks were echoed by a European Commission spokesman, Amadeu Altafaj Tardio, who stressed the need for "full and timely implementation" of Greece's agreement with its international creditors and underlined that "solidarity is a two-way street."
Analyst Vangelis Agapitos said protracted instability would threaten the country's eurozone membership. Greece's debt inspectors -- the eurozone, IMF and European Central Bank, collectively known as the troika -- could turn the screws by halting release of the bailout funds until Athens moves forward with its pledged reforms.
"Europe can live without Greece but I don't think Greece can live without Europe," he said. "If the troika is bluffing, Greece will remain in the euro. But if the troika says: `I can negotiate, but first show me some progress,' Greece has no progress to display right now."
"If the troika rattles our bars, then either the people will come to their senses at the next elections or the country will enter an alternative course, and when we open that door we will see what kind of chaos -- or paradise -- lies behind," Agapitos said.
Sunday's big winner was Tsipras' party, whose unprecedented second place with 16.78 percent gives it 52 seats.
Disaffected voters deserted PASOK and New Democracy, the two mainstays of Greek politics, leaving them at their worst level since 1974, when Greece emerged from a seven-year dictatorship. Instead, strong gains were registered by smaller parties, including the extremist Golden Dawn, which rejects the neo-Nazi label and insists it is nationalist and patriotic.
Golden Dawn has been blamed for violent attacks on immigrants and ran on an anti-immigrant platform, vowing to "clean up" Greece and calling for land mines to be planted along the borders. It got 6.97 percent of the vote -- a stunning improvement from 0.29 percent in 2009 -- and won 21 seats.
The election was Greeks' moment to vent their fury over two years of austerity that Athens has been pushing through to qualify for bailout loans. Incomes, benefits and pensions have been slashed repeatedly and taxes hiked. Unemployment has soared to a record of over 21 percent.
PASOK, which has spent 21 years in government since 1981 and stormed to victory with more than 43 percent in 2009, saw its support slashed to 13.18 percent.
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Elena Becatoros and Derek Gatopoulos in Athens, Raf Casert in Brussels and David McHugh in Frankfurt contributed
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