Wed, May 16, 2012 - Page 1 News List

Greek government talks founder, new election to be held

SWAP:Athens opted to pay holders of 430 million euros of a May 15 bond, even though it said those who didn’t accept a March deal would get nothing

Reuters, ATHENS

Greece will hold a new election after politicians failed to form a government yesterday, nine days following an inconclusive vote, prolonging a political crisis that pushes it closer to bankruptcy and exit from the euro.

After a third day of failed talks with political leaders, a spokesman for Greek President Karolos Papoulias said the process of seeking a compromise had been declared a failure and a new vote must be held.

He did not immediately give the date for the new vote, but election rules suggest it will be in the middle of next month. A caretaker government would be formed today, the spokesman said.

“For God’s sake, let’s move towards something better and not something worse,” PASOK leader Evangelos Venizelos told reporters after the meeting. “Our motherland can find its way, we will fight for it to find its way.”

Greece remains without a government since its inconclusive election left parliament split between supporters and opponents of a 130 billion euro (US$166.3 billion) bailout package reviled by Greeks for imposing deep wage, pension and spending cuts.

Polls show the leftist SYRIZA party, which rejects the bailout and placed second in last week’s vote, is now on course to win, a result that would give it an automatic bonus of 50 seats in the 300-seat parliament.

European leaders say that they will cut off funding for Greece if it rejects the bailout agreed in March, which would mean bankruptcy and all but certain exit from the European single currency.

Meanwhile, in an about-face, Greece opted to pay holders of 430 million euros of a May 15 bond, despite having told those who took its bond swap offer in March that they would otherwise get nothing, government officials said yesterday.

The decision averts litigation by the bondholders, and will infuriate the 96.9 percent of creditors, mainly European banks, who agreed to take the deal.

A source close to private creditors involved in the swap, who declined to be identified, called it “scandalous” and wished Greece “good luck for the next restructuring.”

Greece completed a huge debt restructuring in early March, swapping a nominal amount of 177 billion euros of government paper held by private creditors for new securities as part of its second rescue package.

Nearly all bondholders agreed to suffer a loss of 75 percent after being told they had no choice. A few held out, however, demanding to be paid in full. That left about 6 billion worth of bonds that the Greek government must now decide how to handle.

With no new government in place following an inconclusive national election last week, the decision fell to outgoing Greek Prime Minister Lucas Papademos, a technocrat who headed a coalition government of socialists and conservatives.

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