Fierce political rivalries have kept Greece from resolving its leadership crisis, with an anti-bailout party refusing to return to power-sharing talks.
For ninth straight day, party leaders were struggling to form a new coalition government, riven by differences over the harsh austerity measures demanded by international creditors in return for rescue loans. The impasse means the prospect of another national election next month.
The turmoil took a toll on markets across Europe.
The conservative New Democracy party won the May 6 election, but the poll failed to produce an outright winner. Alexis Tsipras, leader of the second-placed, left-wing Syriza party, has refused to join a coalition, demanding that the terms of an international bailout be scrapped or radically renegotiated.
“They are looking for an accomplice to continue their catastrophic work – we will not help them,” said a party spokesman.
Many see fresh elections as inevitable. But a new poll could see anti-austerity parties gaining more support and prompt a rift in 17-nation eurozone and raise the risk of a Greek exit from the shared currency.
“Voices of support (in Europe) to Greece ... are becoming fewer and fewer, while there is a frenetic increase of those that are predicting the country’s exit from the euro,” an editorial in Greece’s top-selling Ta Nea said. “The dramatic drop in state revenues during the election campaign and the serious souring of the atmosphere in Europe toward Greece mean that after almost certain repeat elections there will be a need for even tougher austerity measures.”
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 only continue if the country continues its draconian cost-cutting program
Greece’s two traditionally dominant parties, New Democracy and the Socialist PASOK lost significant support on May 6.
Since the election, Syriza has gained support.
New Democracy and PASOK could form a government without Syriza if they had the support of the small Democratic Left party – but that small party has refused to join any government without Syriza.
“The president has invited us to a new meeting and I will attend,” Democratic Left leader Fotis Kouvelis said. “I will repeat my position, that without the participation of the second largest party, the government would not have sufficient popular and parliamentary support.”
Meanwhile Spain has entered the fray over Greece’s domestic political turmoil with a plea to leaders to reach a deal, after its own borrowing costs rose and share prices fell at alarming rates.
“The best thing Greece can do for its own survival and for the survival of European economic and monetary union in the current situation is to form a government as soon as possible and say as soon as possible” that Greece is going to comply with the terms of its bailouts, foreign minister Jose Manuel Garcia-Margallo said.
Uncertainty over the financial impact of Greece on the wider continent caused markets to fall sharply over the past week. Spain, which is considered the next most likely country to need a bailout in Europe, has been shaken particularly hard.
Mr Garcia-Margallo called the situation “enormously worrisome” but would not say if Spain supported the idea of Greece leaving the euro if it fails to live up to austerity goals set as terms for the bailouts.
The financial turmoil in Spain has also been caused by concerns about the country’s banking sector, which the government last week sought to reform.