Greeks will return to the polls in mid-June after politicians again failed to form a coalition government on Tuesday. At elections on May 6, a majority of voters backed parties opposed to the terms of the bailout demanded by the “troika,” the European Union, the International Monetary Fund and the European Central Bank. Austerity measures are demanded in exchange for Greece receiving 240 billion euros ($307 billion) of aid to address the country’s massive debt and assist it in meeting the demands of foreign creditors.
Greeks’ rejection of these has fueled fears that the country’s exit from the euro zone is not only likely but imminent.
The euro fell to a four-month low on Tuesday: Greece defaulting on its debt portends new troubles in Ireland and Portugal, who also carry heavy debts and rely on foreign creditors.
European Leaders Want Greece in Euro Zone, Provided It Sticks to Austerity
On Monday, the chairman of the eurozone group of finance ministers, Jean-Claude Juncker of Luxembourg, had said he wanted Greece to stay in the euro zone. But he emphasized that Athens must alos stick to the terms of the bailou agreement — the unpopular, and more and more resented, requirements to raise taxes while cutting salaries, pensions and government jobs. Greeks who have jobs in the private sector are also feeling the effects of the economic crisis deeply, with some seeing their wages cut by half.
Saying that amending the bailout agreement is not an option, German Finance Minister Wolfgang Schaeuble is calling Greece’s new vote nothing less than a referendum on whether the country will remain in the euro zone or not. At the first meeting of German Chancellor Angela Merkel and just-inaugurated French President François Hollande on Tuesday, both said they would consider measures to instigate growth in Greece, provided that voters show their commitment to austerity.
Greek President: “Things Will Get Worse”
Since the May 6 elections, nearly $900 million has been withdrawn from Greek banks. According to the New York Times, Greeks withdrew $6.5 billion in January and have been averaging withdrawing $4 billion a month since the end of 2009, when the debt crisis first erupted. The Greek central bank is warning of a “great fear that could develop into a panic” and Greek President Karolos Papoulias said that “things will get worse” in the next two days.
Polls have shown that anti-austerity party Syriza, the Coalition of the Radical Left, would place first in elections. Syriza placed second in the May 6 elections and has refused to join in forming a unity government; the party’s leader, 37-year-old Alexis Tsipras, has emphasized that he will not renege on promises made to voters during elections to reject austerity measures. Tsipras has contended that if Greece leaves the euro zone, it will happen because the terms of the bailout have become impossible and has therefore “irrefutably changed the terms of the debate” even as critics have accused him of being a “risk to Greek stability.”
Tsipras was certainly being referred to in remarks made after the failed talks by Evangelos Venizelos, the leader of the Socialist party PASOK. Noting that “unfortunately, the country is heading again toward elections,” Venizelos — whose party won just over 13% of the vote, its worst showing in 40 years — said that he hoped Greeks would make a more “historically well-considered” choice in new elections.” The attempts to create a unity government had failed, said Venizelos, “because certain individuals put their party’s interest above the good of the country.”
Papoulias will form a caretaker government on Wednesday. Under Greek law, “well respected” individuals are to form such a government, with a prime minister in charge; this latter role is likely to go to the president of the Council of State, Greece’s highest administrative court, Panayiotis Pikramenos.
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