May 8, 2012
Greece braced for repeat elections
Greece is bracing itself for a repeat general election after its centre-right leader failed to win leftwing support to form a “national salvation government” after Sunday’s inconclusive outcome at the polls.

“We are now heading for a second vote next month in a deeply polarised atmosphere,” said a disappointed government official. The repeat election would probably take place on June 17, he said.

The failure of Greece’s two main pro-bailout parties to win a majority compounds a deteriorating economic situation as the government of Lucas Papademos, the technocrat premier, prepares to leave office next week, making way for a caretaker administration.

Mr Papademos, a former European Central Bank vice-president, called for political stability “so that the sacrifices of the Greeks don’t go to waste ... after we have already covered a large part of the difficult journey towards rebuilding the economy”.

Decision-making on further reforms, including finalising a new €11.5bn medium-term austerity package, will be stalled until a new administration is in place.

“Only non-political measures can go ahead,” the official said, admitting that it would be hard to push forward with 77 separate structural reforms due to be completed during June.

The stalemate puts at risk the timetable for disbursement of Greece’s next loan tranche from its second €174bn bailout. Despite a recent transfer of €3.5bn to cover financial emergencies, the country faces being unable to meet pension, salary and debt commitments next month.

The EU and International Monetary Fund have warned they will block further loan disbursements until the next Greek parliament approves the medium-term package, which would include deep cuts in healthcare spending and in public sector jobs – measures that triggered parliamentary rebellions under the two previous governments.

Alexis Tsipras, on a roll after his leftwing coalition Syriza vaulted into second place, almost quadrupling its share of the vote, was given the mandate to try and form a government on Tuesday after Antonis Samaras, whose New Democracy party finished first but fell well short of a parliamentary majority, failed to convince others to join him.

Mr Tsipras said after meeting the president that Greece’s election results had left the country’s commitment to the IMF-EU rescue deal invalid because a majority of people had voted for parties committed to scrapping the bailout.

He said banks should come under state control and called for an international commission to investigate whether Greece’s debt is legal.

“The popular verdict clearly renders the bailout deal null,” Mr Tsipras told reporters.

The stalemate hit Greece’s stock market hard. The benchmark ASE Index dropped 3.8 per cent to 619.52 in late afternoon trade in Athens, the lowest since November 1992. The benchmark gauge has lost 9.1 per cent this year.

Mr Tsipras’s demand has little meaning unless he can form a government. That ambition appears doomed to fail, however, with the Greek Communists preferring self-imposed isolation. The Democratic Left split from Syriza several years ago and shows no sign of wanting to team up again.

Evangelos Venizelos, leader of the third-placed Panhellenic Socialist Movement, or Pasok, has suggested a four-way coalition of “pro-European forces under a prime minister who would be acceptable to a broad spectrum of Greeks”.

Final election results gave New Democracy 108 seats, followed by Syriza with 52 and Pasok with 41, with the remainder shared among four smaller parties including the extreme-right Golden Dawn, which is entering parliament for the first time with 21 seats.

With anti-austerity parties capturing almost 70 per cent in Sunday’s vote Greeks appeared to have expressed rising anger and frustration over high unemployment, wage cuts and a forecast of another 18 months of recession.

“This was a vote against reform ... We saw pro-European socialists who used to be popular losing their seats after years in parliament,” said Taki Michas, a political commentator.

Among prominent socialists who were voted out was Anna Diamantopoulou, the development minister and a former European Commissioner who launched a crackdown on corruption while in office and managed to unblock EU funds left unspent by her predecessors.

It was not clear whether New Democracy and Pasok would be able to regroup quickly after their worst showing at the polls in more than 30 years. Some analysts doubted whether a second election, following on so quickly, would trigger a more moderate voter response.

“All in all, Greece is unlikely to have a strong stable government any time soon, raising political uncertainty and potentially putting its bailout at risk,” said Wolfango Piccolo, analyst at Eurasia Group.


Posted by Kerin Hope at 8:31 AM