By Maria Petrakis and Natalie Weeks - May 9, 2012 4:00 AM GMT+0700
Alexis Tsipras of Greece’s Syriza party squared off with political leaders before talks on forming a coalition, handing them an ultimatum to renounce support for the European Union-led rescue if they want to enter government.
Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. Samaras and Venizelos rejected the request. Samaras said he was being asked “to put my signature to the destruction of Greece.”
Leader of the Greek conservative party New Democracy Antonis Samaras in Athens. Photographer: Aris Messinis/AFP/Getty Images
May 8 (Bloomberg) -- German Chancellor Angela Merkel, Barton Biggs, managing partner and co-founder of Traxis Partners LP, and Carl Weinberg, founder and chief economist at High Frequency Economics, offer their views on European elections, Greece's debt crisis and the outlook for the euro zone. John Taylor, founder and chief executive officer of FX Concepts LLC; Charles Dallara, head of the Institute of International Finance; Andrew Bosomworth, a managing director at Pacific Investment Management Co., and David Blanchflower, a professor at Dartmouth College and a Bloomberg Television contributing editor, also speak. (Source: Bloomberg)
“He interprets, with unbelievable arrogance, the election result as a mandate to drag the country into chaos,” Samaras said late yesterday in televised remarks. “I hope Mr Tsipras will have come to his senses by the time we meet.” Tsipras is due to meet with political leaders from about 5 p.m. in Athens.
The stand-off since the inconclusive May 6 election has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010. With Parliament split and policy makers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.
‘Huge’ Repercussions
The repercussions are “potentially huge,” said Gillian Edgeworth, a London-based economist at UniCredit. “The chances of Spain needing official aid would increase, with implications for spillover to others.”
The risk of Greece leaving the euro by the end of 2013 has risen to as high as 75 percent, Citigroup Inc. said May 7.
Greek stocks sank to their lowest level in about two decades yesterday amid the political instability. The benchmark ASE Stock index fell 3.6 percent to 620.54 at the close in Athens, its lowest since November 1992. The Stoxx Europe 600 Index slid 1.7 percent. The euro fell 0.3 percent to $1.3007.
New Democracy and Pasok, rivals until the country’s crisis made them pro-bailout partners in a national government last year, are two deputies short of the 151 seats needed for a majority in the 300-seat chamber. President Karolos Papoulias handed the mandate to build a coalition to Tsipras yesterday, one day after Samaras, who won the election, abandoned his bid to forge a government.
Tsipras said he aimed to link up with parties in a government that would nationalize banks, place a moratorium on debt payments and cancel the bailout and measures such as labor reforms and pension cuts.
‘Plunder’ Greece
“The bailout parties no longer have a majority in parliament to vote for measures that plunder the country,” Tsipras told reporters. “There will be no 11 billion euros ($14 billion) of additional austerity measures; 150,000 jobs will not be cut.”
Samaras said yesterday that his party is prepared to support a minority government as long as it ensured Greece’s membership in the euro and its national interests.
Venizelos said Pasok’s proposal for a national unity government with the participation of all parties with a pro- European orientation was the only solution. Greece must remain “safely” within the euro while pursuing changes to the bailout accord to boost growth, he said.
International creditors urged Greek leaders to hold to the agreed terms of their EU-International Monetary Fund bailouts.
‘No Alternative’
“Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone,” European Central Bank Executive Board member Joerg Asmussen was quoted as saying in an interview with Germany’s Handelsblatt newspaper to be published today.
German Foreign Minister Guido Westerwelle called on “the authorities in Greece to quickly move toward stability so that a government of reason can be formed,” telling reporters in Berlin that the steps to be taken in return for aid “are not up for negotiation.”
New Democracy won the election with 19 percent of the vote, gaining 108 seats; Syriza came second with 17 percent, winning 52 seats; and Pasok placed third with 13 percent, or 41 seats.
Tsipras met yesterday with the leader of Democratic Left, which won 19 seats in Parliament and rejects austerity measures. As well as talks with Samaras and Venizelos, he’s due to see the head of Independent Greeks, Panos Kammenos, who has 33 seats.
If Tsipras fails to build a working majority, the onus on forming a government will pass to Pasok. Each mandate can last for three days. If the process still fails to yield a coalition, the president must try to broker a government of national unity, the constitution says. If that fails, new elections are held.
New Elections
“A Greek return to the polls in mid-June looks increasingly likely,” Malcolm Barr, an economist at JPMorgan Chase & Co in London, said in a note. “There is little doubt that the drop in support for New Democracy, Pasok has raised the probability of an eventual euro exit.”
Either New Democracy and Pasok will form a government with the Democratic Left or Greece will hold new elections within weeks, said Thanos Veremis, the vice president of the Hellenic Foundation for European and Foreign Policy. New elections are the more likely scenario, in which case New Democracy and Pasok would see a return of voter support, he said. Veremis was an unsuccessful candidate on May 6 for Drasi, a pro-bailout party that failed to reach the threshold for entering the parliament.
“The Greeks have to blow their top to let the world know they are unhappy,” Veremis said by phone on May 7. “Once they do that, they tend to go back to the real world.”
To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Natalie Weeks in Athens at nweeks2@bloomberg.net.
To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net; Jerrold Colten at jcolten@bloomberg.net
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