Greece in last ditch effort to form government

“The Greek people have not just sent a message, they have issued an order to change policy but to remain in Europe,” New Democracy leader Antonis Samaras (photo, left) told reporters before meeting President Karolos Papoulias.

“It is an order to cooperate and form a viable government that will last until the European elections. It has to be a government that is above and beyond specific personalities,” he said.

Despite political efforts, an agreement looked unlikely on Sunday because of rifts between those in favour and those opposed to the International Monetary Fund and European Union bailout that calls for harsh cutbacks.

President Papoulias met leaders of the country’s three biggest parties – Pasok, the centre-right New Democracy and Syriza – in a final attempt to implore them to form a coalition before he must call another election.

Moment of truth

Yet the meeting broke up after less than two hours of talks, and leaders said the discussions had hit a snag, though they expressed the hope that difficulties could be overcome.

“Even now, despite the impasse at the meeting we had with the president, I hold on to some limited optimism that a government can be formed,” said Socialist leader Evangelos Venizelos, whose PASOK party finished a humbling third in Sunday’s election. But he warned time was running out.

“The moment of truth has come. We either form a government or we go to elections.”

His conservative counterpart, Antonis Samaras, said talks to form a government were continuing but blamed the radical leftist SYRIZA party for blocking efforts to form a coalition.

Samaras placed first in the election last week but fell far short of an outright majority, punished by voters for backing a bailout package tied to harsh austerity cuts in the heavily indebted country.

Syriza which campaigned against the bailout, finished a surprise second in the vote. Both Samaras’s New Democracy and Venizelos’ PASOK party – which have taken turns to rule Greece for nearly four decades and jointly negotiated a bailout that requires deep cuts in public spending – are eager to avoid facing the voters again.

Market turmoil

The balance of power in Greece has tipped toward leftists opposed to bailouts which averted bankruptcy but deepened Greece’s devastating recession, polls showed. More than one million Greeks are unemployed.

The inconclusive election results a week ago plunged Greece into further chaos, as neither the pro- nor the anti-bailout camp had the required number of seats to rule parliament.

Prospects for a new election have caused havoc in financial markets in Greece and across Europe, with the euro sinking to its lowest point since January, at near $1.29.

EU leaders warn that Greece could stop getting aid and find itself pushed out of the euro without a government backing the 130-billion euro rescue plan agreed in March.

Bankruptcy fears

Banks wrote off much of their Greek debt this year and Brussels’ officials, who at one time refused to discuss any country leaving the euro, now talk about a Greek exit as a real possibility.

“Technically, it can be managed,” Irish central bank chief and European Central Bank policymaker Patrick Honohan said, adding that a Greek exit would be a knock on confidence but not necessarily “fatal” for Europe.

The stakes for Greece are much higher, however. The country risks bankruptcy in weeks without aid from the EU and the IMF.