Greece goes into new round of coalition talks

By Nicholas Paphitis

Associated Press

Published: Monday, May 14 2012 11:32 a.m. MDT

ATHENS, Greece — Fierce political rivalries battered Greece on Monday as an anti-bailout party refused to return to power-sharing talks, keeping the debt-strapped nation paralyzed in a leaderless vacuum.

For the eighth straight day, Greek party leaders were struggling to form a coalition government, riven by differences over the harsh austerity measures demanded by international creditors in return for rescue loans. The impasse significantly raises the chances that Greece will hold another national election in June.

The turmoil took a toll on markets across Europe and at home, with shares on the Athens Stock Exchange closing down 4.6 percent at 584.04.

After talks failed Sunday, President Karolos Papoulias invited party leaders back Monday evening to try again. The leaders of the conservative New Democracy party, the Socialist PASOK party and the small Democratic Left party accepted the offer, but not the leftist Syriza party.

New Democracy party had the most votes in the May 6 election, but no party received even 20 percent of the vote, and any coalition would need a combined 50 percent. Alexis Tsipras, leader of Syriza that finished second, has refused to join a coalition that accepts the terms of the international bailout.

He wants to scrap or renegotiate the deal, and may favor a new election because support for his stance is growing in Greece.

"They are looking for an accomplice to continue their catastrophic work," Syriza spokesman Panos Skourletis told Mega television. "We will not help them."

Many see another election as inevitable, but if anti-austerity parties were to gain more support and be able to govern, that could prompt a rift in the 17-nation eurozone and raise the risk of a Greek exit from the shared currency.

Nobody knows how catastrophic that could be for Greece, Europe or the global economy.

"As the recent series of failed negotiations have shown, there is little cross-party consensus on any of the major issues facing Greece — political, social or economic," said Neil Prothero, a senior economist at Economist Intelligence Unit. "But whatever the outcome, the outlook for Greece, and the wider eurozone, remains fraught with uncertainty."

Prothero said it looked like Syriza was rejecting the current system to strengthen its future demands against Greece's international creditors. But he also said the Greek situation could challenge EU assumptions that they have built up enough of a firewall to handle the crisis.

"The growing view among eurozone policymakers that contagion arising from a Greek exit from the currency bloc could be sufficiently contained may soon be tested," he said.

Shut out of main debt markets, Greece is surviving on rescue loans from other euro countries and the International Monetary Fund, who have repeatedly warned that payments will continue only as long as the country continues to cut its spending.

Greece's two traditionally dominant parties, New Democracy and the Socialist PASOK, lost significant support in the May 6 elections as Greece suffers through a fifth year of recession, with more than one in five of its citizens out of work.

Syriza finished second in those elections, and its support has grown since. In a poll published Monday, Syriza had 20.5 percent of public support, compared with 19.4 percent for New Democracy and 11.8 percent for PASOK. The margin of error was 3.1 percent for the Rass poll of 1,002 people, conducted May 10-11 for the Eleftheros Typos newspaper.

New Democracy and PASOK could form a government without Syriza if they had the support of the small Democratic Left party — but that party has refused to join any government that doesn't include Syriza.

"The president has invited us to a new meeting and I will attend," Democratic Left leader Fotis Kouvelis told Antenna television. "I will repeat my position: that without the participation of the second-largest party (Syriza), the government would not have sufficient popular and parliamentary support."

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