Greek parties go into coalition talks as fresh poll looms

Greek political parties go into last chance talks Monday on forming a coalition, under pressure from Brussels to strike a deal as differences over a painful EU-IMF debt bailout make new polls more likely.

Failed negotiations Sunday left the country without a government able to implement the tough austerity measures Athens agreed to in return for the debt rescue, putting its eurozone future in doubt.

President Carolos Papoulias was to receive party leaders from 1630 GMT while eurozone finance ministers meet in Brussels with Greece and the eurozone debt crisis top of the agenda as officials insist Athens stick to the terms.

If Athens does not and the debt accord lapses, eurozone leaders appeared reluctantly prepared for Greece to leave the 17-nation bloc despite fears that could destabilize the whole euro project.

Germany, the eurozone’s paymaster and biggest economy, said Monday that forming a government was the most important concern while stressing that there could be no relaxation in the Greek bailout terms.

“For the German government, the most important thing is that the political forces succeed in consolidating themselves into a workable majority, a workable government,” German government spokesman Steffen Seibert said in Berlin.

Head of the European Commission Jose Manuel Barroso meanwhile still “hopes and wishes” that Greece can remain in the eurozone but Athens must live up to its commitments, his spokeswoman Pia Ahrenkilde Hansen said.

“Brutal messages are being sent to Greece: we’ll see if that knocks some sense into the leaders of the Greek political parties,” a senior diplomat said in Brussels.

In May 6 elections, Greeks lodged a huge protest vote against the austerity measures and no party managed to win a majority in parliament, which convenes Thursday when fresh elections must be called if there is no government in place.

On Monday, the head of a small moderate leftist party, seen as the last hope for a coalition, said there was no chance of a unity government being formed.

“No unity government can emerge,” Fotis Kouvelis, head of the Democratic Left, told Greek television, pointing to the refusal of the radical leftist Syriza party -- which came second on May 6 -- to join a coalition.

“A government without Syriza would not have the necessary popular and parliamentary backing,” Kouvelis said.

Syriza leader Alexis Tsipras will not attend Monday’s talks, which will include the conservative New Democracy and the socialist Pasok parties that backed the 240 billion euro ($310 billion) EU and International Monetary Fund debt deal.

New Democracy, which came first in the polls, and Pasok third, would control 168 of the 300 seats in parliament if they could combine with the Democratic Left, which came last with 6.1 percent of the vote.

Kouvelis insisted, however, that Greece must “immediately” start to disengage itself from a bailout deal that many see as only making problems worse as Greece languishes in a fifth year of recession.

Greeks appeared skeptical, expecting the country will have to go to the polls again even if most do not want to give up the euro.

Katerina, an English teacher in Athens, said she was “not very hopeful that a resolution will be found ... Too many different interests are at stake.”

As for leaving the euro and returning to the Greek drachma, “I am not sure exactly what that means,” she said, adding: “I would definitely prefer that we remain in the euro ... call it a false sense of security.”

For unemployed Velisarios, who has a degree in economics, Greece wants it both ways -- “to remain in the eurozone but not have the loan agreement.

“That is what the majority wants ... (but) of course, something like that can’t happen,” he said.

The stakes could not be higher for Greece, given the uncertainties of a euro exit, and for the wider eurozone as voters grow disenchanted with governments that stress austerity to stabilize public finances at the expense of growth.

The election of Socialist Francois Hollande as French president on a pledge that growth must come first has ruffled feathers in Berlin where Chancellor Angela Merkel is under pressure too.

The drawn-out debt rescue negotiations and now the Greek political impasse have become the lightning rod for fears over the eurozone’s future, roiling European markets which tumbled again Monday as investors looked for safety.

Investors worry that if the Greek crisis cannot be contained, other much larger eurozone states such as Spain and Italy could need a bailout too, costing even more than those for Greece, Ireland and Portugal.

European stock markets slumped Monday, extending heavy losses while Wall Street opened sharply lower.

“Greece’s time in the euro seems limited now, and a large bill for their default will need to be paid. ... Germany’s percentage of that will be large enough to shake the eurozone further,” said broker Jonathan Bristow at Valbury Capital.

Recent opinion polls show Syriza likely to emerge as the largest single party in fresh elections, opening up a whole new political landscape.

“Syriza wants elections,” Kouvelis of the Democratic Left said, adding that the country was “clearly” heading for a new ballot.

Syriza reiterated Monday that it would not attend the next round of talks and demanded that details of Sunday’s negotiations be released “so that the Greek people be informed of the plans and positions of the parties.”