Greek leftists rejected a last-ditch proposal by the head of state yesterday to put technocrats in charge of the country, as financial markets slid on speculation that political turmoil would force Athens out of the eurozone.
President Karolos Papoulias has summoned party leaders to hear his proposal today. They agreed to attend but expressed little hope it would resolve a deadlock which has left Greece with no government to steer it away from bankruptcy, since an inconclusive parliamentary election eight days ago.
If Papoulias’s proposal fails, he must call a new vote, which opinion polls suggest would be won by leftist opponents of a painful EU/IMF bailout. European leaders say unless Greece fulfils its bailout commitments, they will cut off funding, which could push Greece out of the euro.
Disarray stems from the election on May 6 that left parliament split evenly between supporters and opponents of the €130bn bailout deal. Neither side, each including several parties, has been able to form a government.
Papoulias will present his proposal to party leaders at 2pm (1100 GMT) today, but the bailout’s most influential opponents — the radical leftist Syriza party which was a big winner in the election — said it saw it as just another way to foist on Greece a government that would implement the sharp cuts in spending and the tax increases demanded by the bailout plan.
“We will attend the meeting, but we are sticking to our position. We don’t want to consent to any kind of bailout policies, even if they are implemented by non-political personalities,” Syriza spokesman Panos Skourletis said.
“The fact that it’s going to be implemented by non-political people doesn’t change the purpose of this government, which is to implement the bailout.”
Mr Papoulias resolved a similar deadlock six months ago by naming technocratic former central bank governor Lucas Papademos as prime minister, a move that allowed the bailout negotiations to be concluded. But this time, the anti-bailout contingent in parliament is stronger and angrier.
The prospect that a new vote would bring Syriza and its allies to power — accompanied by open threats by EU leaders to eject Greece from the euro if it abandons the bailout — sent European shares sliding and Spanish and Italian bond yields higher. Investors fear a Greek exit could make it harder for Madrid and Rome to persuade creditors to keep lending.
Socialist leader Evangelos Venizelos, whose party commanded a majority in the outgoing parliament but was reduced to third place behind Syriza in last week’s elections, backed Mr Papoulias’s proposal. But he doubted it would succeed.
“We support a government of personalities as an emergency solution,” he said. “It’s not normal to have a government by technocrats or personalities, but when you are in such a crisis, in such a dead end, we have to accept this as well.”
The leader of the moderate Democratic Left party, which has enough seats to offer the pro-bailout parties a majority but has refused to join a coalition that did not include Syriza, said he opposed the technocrat proposal as well.
“I told the president that a government by technocrats or personalities would suggest the failure of politics, and raised my objection,” Fotis Kouvelis said.
With Greece set to run out of money as early as next month and no government in place to negotiate the next aid tranche, investors are now betting that a long-speculated Greek default and euro exit will happen sooner rather than later.
“There’s a real risk for the market that at some point Greece will have to leave the euro if they don’t find political cohesion,” said ING strategist Alessandro Giansanti.
Emboldened by a reinforced financial firewall to protect weak eurozone states, and by an injection of cheap money to banks from the European Central Bank, EU leaders have broken a taboo by openly discussing the possibility of Greece leaving the euro zone, stressing it is a choice for Greeks to make.