Thursday, May 10, 2012

Greece in chaos as Alexis Tsipras's coalition talks fail

 Alex Spillius

By Alex Spillius, Athens 10:50PM BST 09 May 2012

Greece's political turmoil deepened last night after a key Leftist leader failed in his bid to form a coalition government, making fresh elections next month all but inevitable.

Greek leader of Coalition of the Radical Left party (SYRIZA)  Alexis Tsipras

Greek leader of Coalition of the Radical Left party (SYRIZA) Alexis Tsipras Photo: AP

Alexis Tsipras, whose Syriza party was the surprise runner-up in Sunday’s election and is expected to fare even better in a second election, had earlier declared the €130 billion (£104 billion) EU bail-out of Greece dead in a letter to Brussels.

He told colleagues "we cannot make true our dream of a Left-wing government" after failing in a bold challenge to the two mainstream parties, Pasok and New Democracy, to renounce the recovery plan they supported last year.

Antonis Samaras, leader of the conservative New Democracy party, who has already tried and failed to form a coalition, said the pulling out of the loan package would lead to "Greece's exit from the euro and the country's bankruptcy".

According to the constitution, today it will be the turn of Evangelos Venizelos, leader of Pasok, the formerly dominant socialist party that came third, to try and lead a coalition.

Mr Venizelos, whose party is tainted by years of corruption and mismanagement, is also expected to fail, and June 17 was yesterday being widely discussed as the date for a fresh election.

 

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The continued political uncertainty will further undermine confidence among Greece's international creditors, not least because Mr Tsipras will remain a key figure on the political scene.

His party could come first in the next election or do well enough to form a Left-wing coalition intent on tearing up the bail-out and nationalising Greek banks.

Riding high on a surge of anti-austerity sentiment in Greece and France, the charismatic Mr Tsipras even sought a meeting with François Hollande, the French socialist president-elect. Reports said Mr Tsipras was rebuffed on grounds of protocol because he is merely a party leader and not head of state.

The rising star of Greek politics, he dismayed officials in Brussels by stating in writing that the rescue plan was unacceptably harsh for the Greek people, who are enduring a fifth year of recession and 22 per cent unemployment.

Senior figures in Germany, the biggest contributing country to the bail-out, reacted firmly to the strident statements by the 37-year old former Communist.

Klaus-Peter Willsch, a close ally of Chancellor Angela Merkel, said: "We should offer Greece a controlled exit from the eurozone, without withdrawing from the European Union. The dogma that no country is allowed to leave the eurozone has already caused too much damage to European policy."

Guido Westerwelle, the German foreign minister, warned that the next loan to Greece could be withheld if it failed to keep its promises, which include identifying another €11 billion in savings by next month. "If Greece ends the reform process it has undertaken, then I can't see that the respective tranches [of aid] can be paid out," he said.

However, Angela Merkel, the German chancellor, stressed she still wants to keep Greece in the eurozone.

"I have always wanted to solve (the debt crisis) in such a way that Greece remains a member of the eurozone. Nothing about that has changed," she was quoted as saying in an interview with the daily Passauer Neue Presse.

More than 70 per cent of Greeks want to stay in the euro, but a similar proportion voted for parties that opposed the memorandum of understanding between the government and its creditors that required drastic government budget cuts and higher taxes in exchange for the loans.

The risk of Greece leaving the euro by the end of 2013 has risen to 75 per cent, according to Citigroup analysts.

A senior ally of Mr Tsipras suggested that Greece's creditors would not force it to the wall. "Our wish to stay in the eurozone is our biggest single negotiating tool," said Yiannis Bournous. "There is no European treaty that allows for one country to be kicked out."

Greece in chaos as Alexis Tsipras's coalition talks fail - Telegraph