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Tags: Greece | Election | Euro | Bailout

Greece Heads to New Election With Euro, Bailout at Stake

Thursday, 17 May 2012 09:50 AM

Greece headed toward national elections six weeks after the last vote, with its future in the 17-nation euro area and the international bailout at stake.

Panagiotis Pikrammenos, head of Greece’s Council of State, the highest administrative court, was sworn in as head of the caretaker administration yesterday and his caretaker government today. Elections will be held on June 17, acting Parliament speaker Vyron Polydoras told lawmakers elected in the May 6 poll. The new parliament was sworn in today and will then be dissolved.

“The battle which is beginning, the elections, isn’t about isn’t about any party,” Antonis Samaras, leader of the New Democracy party, told his lawmakers. “It is about whether Greece will remain in Europe, a Europe that is changing, or whether Greece will be forced to leave Europe, losing much and risking much more.”

The new vote follows inconclusive May 6 elections that pushed a political party opposed to Greece’s international bailout into second place, raising the specter of Greece leaving the euro. Opinion polls say that the party, Syriza, may come in first next time, complicating Greece’s efforts to avoid running out of cash by early July.

“I have read that due to my name I am the most appropriate prime minister,” Pikrammenos, whose name means “bitter” in Greek, told the country’s president yesterday. “It is a great joy and also a great burden.”

Failed Attempt

Samaras’s New Democracy party came first in the May 6 election, though fell short of an outright majority in parliament. President Karolos Papoulias failed in a bid to broker a governing coalition in meetings May 15 with party leaders in Athens.

The political standoff has reignited concern the country will renege on pledges to cut spending as required by the terms of its two bailouts worth 240 billion euros ($306 billion) negotiated since May 2010. That could leads to funding being cut off and Greece ultimately leaving the euro area.

Syriza leader Alexis Tsipras said yesterday he demanded the caretaker government freeze the implementation of wage and pension cuts and other austerity measures until the elections are held and a new government is formed. He also called for all state asset sales to be immediately frozen and said Europe must reexamine its policy of austerity and acknowledge it has failed.

The previous prime minister, Lucas Papademos, told his successor that it was important for the country to continue to meet international obligations.

“During this period it’s particularly important to fulfill the country’s responsibilities because these policies will help the stability of the country,” Papademos told Pikrammenos yesterday in Athens after he was sworn in.

European Stocks Fall

Greece’s benchmark ASE Index fell 0.6 percent to 555.01 at 11:12 a.m. in Athens trading, its lowest level since 1990. European stocks dropped for a fourth day, with the Stoxx Europe 600 Index slipping 0.4 percent to 243.54.

The euro fell 0.2 percent to $1.2725 at 9:14 a.m. in London.

National Bank of Greece SA tumbled 13 percent yesterday as the country’s central bank chief said citizens had withdrawn as much as 700 million euros ($891 million) from Greek banks.

“Nobody knows exactly what will be unleashed when Greece does default and exit,” Megan Greene, senior economist at Roubini Global Economics LLC said on Bloomberg TV today. “We’re already seeing deposits flee from Greece. When Greece does exit we’ll see bank runs in Portugal and Spain and I think that the ECB is poised to step in and try to plug that gap.”

National’s shares were unchanged in Athens trading today.

International Rescue

The May 6 election left New Democracy and Pasok, the two parties that supported the international rescue in an interim government this year, two deputies short of the 151 seats needed for a majority in Parliament. Syriza, which advocates canceling the bailout and nationalizing banks, came in second, and resisted pressure to join a coalition government.

Opinion polls conducted since the last election suggest that Syriza would come in first in a rerun, though short of an outright majority.

Syriza would garner the most support in fresh elections with 22 percent of the vote, according to a poll by Pulse, state-run Athens News Agency said.

New Democracy would finish second with 19.5 percent of the vote, the newswire reported, citing the poll findings, published in Pontiki newspaper. The socialist Pasok party would get 14 percent of the vote, ANA said.

The country will run out of cash by early July if partners decide to withhold their next aid payment.

© Copyright 2022 Bloomberg News. All rights reserved.

Thursday, 17 May 2012 09:50 AM
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