ATHENS – A last-ditch effort to set up a coalition government in the wake of stalemated May 6 elections and stave off a possible exit from the Eurozone has failed, setting up new elections next month – likely June 17 – with little promise those would result in a new administration. Greek President Karolos Papoulias had met with five of the seven parties who won enough seats to be represented in Parliament, but none had enough support to rule outright, leading to a political deadlock.
He couldn’t get them to agree because of a deep divide over whether to keep administering austerity measures demanded by the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) in return for a first series of $152 billion in rescue loans and a second planned bailout of $172 billion to keep funding for salaries and pensions. The Troika has warned if the next government wants to keep getting bailout loans that it must make another $15 billion in cuts and implement more austerity, measures rejected by 68 percent of voters – although 80 percent said they want to stay in the Eurozone of the 17 countries using the euro as a currency at the same time.
Papoulias was trying to make a last-ditch effort with New Democracy, SYRIZA, PASOK, the Independent Greeks and the Democratic Left to work together with a government of “personalities,” that could be led by a technocrat, not a politician, but the leaders continued to squabble and couldn’t find common ground. Communist leader Aleka Papariga boycotted the talks while the neo-Nazi Golden Dawn was not invited.
Papoulias will convene a meeting on May 16 to set up a caretaker government that will rule until the elections. Stock markets dropped immediately and the euro declined in the wake of the spectacular collapse to reach an agreement. “For God’s sake, let’s move towards something better and not something worse,” PASOK Socialist party leader Evangelos Venizelos told reporters after the meeting. “Our motherland can find its way, we will fight for it to find its way.”
Polls show the leftist SYRIZA party, which rejects the bailout, is now on course to win, but as a coalition might not be eligible to get a 50-seat bonus that could give it a majority and allow the Leftists to form a government next month. European leaders say that they will cut off funding for Greece if it rejects the bailout agreed in March, which would mean bankruptcy and all but certain exit from the European single currency.
“We are going to have not just one but two more elections,” Spiros Rizopoulos, owner of Spin Communications, a consultancy in Athens, told the British newspaper The Telegraph. He said that some voters would pull back from SYRIZA, but not enough to guarantee a majority for the old guard, an outcome that would necessitate a third poll. “Tsipras is running on rage but you can only go so far on rage. At some point you have to say ‘this is my ideology’, this is what I am going to do,’” he said.
The Greek crisis was being watched intensely by political leaders from the European Commission headquarters in Brussels to Washington, D.C., Wall Street and around the world over fears that the failure to form a government could lead to Greece being pushed out of the Eurozone and jeopardize the entire 17-country economic bloc of countries using the euro as a currency and set off a domino-like effect that could affect other troubled EU countries such as Portugal, Spain and Italy.
The crisis intensified after the May 6 elections failed to give any party enough support to form a government and control the 300-member Parliament. The country had been ruled by a shaky hybrid government of the New Democracy Conservatives, who won but with only 18.8 percent of the vote, and the PASOK Socialists, who finished a dismal third with 13.2 percent. Both parties, while ideological rivals, supported the deep pay cuts, tax hikes and slashed pensions insisted upon by the Troika, but backed off just before the elections, sensing public outrage.
The other five parties who gained seats in Parliament were opposed to the austerity measures and none of the leaders of the first three finishers, including the surprise second-place Coalition of the Radical Left (SYRIZA) led by 37-year-old Alexis Tsipras could rally enough support to form a coalition because of bitter differences over austerity. Tsipras said he wanted to nullify the terms but keep Greece in the Eurozone – positions the Troika said were mutually exclusive – while New Democracy leader Antonis Samaras, who has flip-flopped on austerity, said he wanted to renegotiate the conditions he supported. Venizelos, who as finance minister in the coalition doubled income and property taxes and taxed the poor while insisting austerity was the only course Greece could follow, also backtracked and said he too wanted more time to implement reforms.
The party leaders blamed each other for a failure to find a compromise. Panos Kammenos, a New Democracy outcast whose new Independent Greeks party finished fourth on an anti-austerity platform, departed the Presidential Palace in an obvious state of annoyance. He said that, “They (New Democracy and PASOK) chose the country’s lenders over a national solution.” He later accused Samaras of pushing for a second round of elections, “because he wants to become Prime Minister,” and that Venizelos “agreed on our seven points apart from rejecting bailout and unilateral default.” New Democracy officials said Kammenos’ comments were “laughable,” as the finger-pointing continued.
Democratic Left leader Fotis Kouvelis, who said he would have joined another New Democracy-PASOK coalition if SYRIZA – which rejected the idea – also agreed, said later, “There was no agreement between political forces.” He said that some parties had made a “political choice” to go to new elections in order “to serve their parties’ interests.” There was no comment from SYRIZA.
What’s worrying the Troika and political leaders in other countries now is whether the failure of the talks or an inability to form a new government after the next elections because of the deep divide will result in Greece leaving the Eurozone and returning to its ancient drachma, a scenario many analysts said would lead to 50 percent inflation and even worse chaos.
Lucas Papademos, the former ECB Vice-President who served as interim Prime Minister in the six-month coalition, had warned that Greece would run out of money by July 1 if the failure to form a government led the Troika to pull the plug on the next bailout installments and as Greece needs to make loan repayments. There were doomsday predictions that Greece would be left without enough cash to pay its bills, workers or pensioners, just as the tourist season arrives in full swing. The political instability has already led to drops in hotel bookings by as much as 50 percent in some cases. The tourism sector is Greece’s most important, bringing in about 18 percent, or $54 billion, of the country’s $300 billion Gross Domestic Product.
The austerity measures that have created the schism have worsened a deep recession now in its fifth year in Greece and created 21.7 percent unemployment, the closing of scores of thousands of businesses – with another 1,000 each week shuttering their doors – and set off two years of protests, strikes and riots to no avail.
Greece’s international lenders have warned that they won’t discuss further aid disbursements until a new government is formed. Swedish Finance Minister Anders Borg warned Greece may be nearing the end of its time in the Eurozone. “We are very close to the end of the road,” Borg told reporters in Brussels. “The situation is very serious.”
“They should go to hell. Only God knows what’s waiting for us now. I’m very scared about the future,” Giouli Thomopoulou, 59, an unemployed office clerk, told Reuters. “I don’t think elections will solve anything because in a month we’ll be in the same situation.” And Panos Leonidas, 57, a travel agency worker, told the wire service he had given up. “The country is finished,” he said. “From now on, you can only live here if you’re an animal.”
(Sources: Kathimerini, AP, Reuters, The Telegraph, Wall Street Journal)