Greek election impasse heralds lengthy instability

Associated Press Modified: May 7, 2012 at 3:31 pm •  Published: May 7, 2012
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ATHENS, Greece (AP) — Greece sank deeper into a political and financial morass on Monday as initial efforts to form a new coalition government failed a day after angry voters punished parties backing the country's international bailout.

The result of Sunday's parliamentary election raised troubling new questions about Greece's ability to stay solvent and in the euro currency bloc. And the political impasse means Greece could face another round of elections next month.

Voters furious over years of painful budget cuts and higher taxes hammered the conservative New Democracy and socialist PASOK, the two parties who have dominated politics for the last four decades and who had signed up to the country's multibillion dollar bailouts.

The result was a clear anti-austerity message. Smaller parties that had rejected the draconian terms of Greece's rescue packages made significant gains, raising the possibility that they might push the country out of the euro.

They included the extremist Golden Dawn party, which rejects the neo-Nazi label but has been blamed for violent attacks against immigrants. The party won 21 seats in the 300-member parliament, and nearly 7 percent of the vote.

No party won nearly enough votes to form a government, leaving a coalition government or new elections as the only options.

New Democracy's Antonis Samaras, who came in first with a meager 18.8 percent of the vote and 108 seats, failed to build a coalition and handed back the mandate to the president.

"We did everything possible," Samaras said in a televised address. "We directed our proposal to all the parties that could have participated in such an effort, but their either directly rejected their participation, or they set as a condition the participation of others who however did not accept."

The uncertainty caused huge volatility in financial markets across Europe. The Athens exchange closed 6.7 percent down.

And Greece's bailout creditors appeared alarmed, stressing Athens must stick to its commitments.

"Of course the most important thing is that the programs we agreed with Greece are continued," said German Chancellor Angela Merkel.

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."

Now that Samaras has failed to create a government, the mandate goes to Alexis Tsipras, the 38-year-old head of the Radical Left Coalition, or Syriza, who came in second place with 16.78 percent and 52 seats.

Tsipras will officially be tasked to seek coalition partners Tuesday and will have three days to clinch a deal before the mandate then passes to former finance minister and PASOK head Evangelos Venizelos.

If no agreement can be found new elections will be called, probably for June.

The timing is critical. Greece has to introduce new drastic austerity measures worth €14.5 billion ($19 billion) for 2013-14 in June, while the country is also due to receive a €30 billion ($39.4 billion) installment of its rescue loans from the other countries in the 17-strong eurozone and the International Monetary Fund.