Greece abandoned a nine-day hunt for a government yesterday and called a new election that threatens to hasten the nation’s slide towards bankruptcy and a future outside the eurozone.
There is now a considerable danger that Greece simply runs out of money next month
An inconclusive election on May 6 left Parliament split between supporters and opponents of a €130 billion bailout deal which is reviled by Greeks for imposing deep wage, pension and public spending cuts.
A second election is expected to produce a similarly divided Parliament, with opponents of the EU/IMF rescue consolidating their gains and raising the likelihood of an anti-bailout coalition that reneges on the deal keeping Greece afloat.
“For God’s sake, let’s move towards something better and not something worse,” Socialist leader Evangelos Venizelos told reporters after a meeting of party leaders failed to agree on a government of technocrats. “Our motherland can find its way, we will fight for it to find its way.”
European leaders have said they will halt the aid if promises given in return for the bailout are not kept. If so, Greece could go bankrupt as early as next month. Analysts say that this will almost certainly herald a Greek return to its drachma national currency.
“There is now a considerable danger that Greece simply runs out of money next month – that it can’t pay wages, can’t run public transport, can’t maintain infrastructure and that the country just descends into complete chaos,” said Jonathan Loynes, chief European economist at Capital Economics, which predicts the country could leave the currency bloc this year.
Financial markets, worried that Greece’s crisis could spread to bigger eurozone economies such as Spain and Italy, tumbled on the news. US stocks erased pre-market gains while the euro fell against the dollar. Greek stocks fell five per cent.
A compromise for a government to save the country proved elusive after the three biggest parties each failed to form a coalition last week and three additional rounds of talks mediated by the President proved fruitless.
The strain of days of wrangling showed on the five party leaders as they sat down to talks at the presidential mansion yesterday, with most wearing a dejected look. A tense meeting ensued, Greek media reported.
After barely two hours, the politicians threw in the towel. A spokesman for President Karolos Papoulias said a new election would be held, which is expected in mid-June.
A caretaker government would be formed today, the spokesman said.
Greece has lurched from one crisis to the next over the past two years, with growing public anger over soaring unemployment and falling living standards as the country endures its fifth year of recession.
Nearly one in five Greek workers has no job, while protests, riots and highly public suicides have become common in an increasingly volatile social climate.
Initially exultant at having humiliated the once-dominant Socialist and conservative parties in the May 6 vote, Greeks are now increasingly worried the country is on a path of no return.