Greece began a second day of coalition talks yesterday under the gun from financial markets and world powers after elections won by a pro-euro party that also reflected rising anger against austerity.
The conservative New Democracy was negotiating a coalition with the socialist PASOK and the Democratic Left party after clinching a narrow victory against radical leftists SYRIZA, who want Greece’s EU-IMF bailout deal torn up.
The three parties “are close to a deal,” the socialist Ethnos daily reported.
PASOK leader Evangelos Venizelos has voiced hope that a coalition would be announced later yesterday and Democratic Left leader Fotis Kouvelis said it was possible “within the next few hours, if we reach agreement.”
After meeting with Kouvelis, Venizelos said coalition talks were being “sped up” and added: “Greece must and will have a government as soon as possible.”
New Democracy chief Antonis Samaras, a 61-year-old former foreign minister, won 129 of the 300 parliamentary seats on Sunday, SYRIZA won 71, PASOK 33 and Democratic Left 17.
The results of Greece’s most important elections since the end of military rule in 1974 eased fears of an immediate euro exit, but any new government faces a potential stand-off with its EU-IMF creditors over the terms of the bailout.
Greece only has enough cash reserves to pay public sector salaries and pensions to last until July 20 and the EU and the IMF have suspended loans until a government is formed.
Europe and the US have urged Greece to move quickly to form a new government and enact the reforms it has agreed to in return for the loans. Key creditors like Germany have held out the possibility of extending a key 2014 deficit-cutting deadline but say the content of the deal cannot be changed.
“There cannot be rebates, there cannot be deductions,” German Federal Minister of Economics and Technology Philipp Roesler said after talks at the White House in Washington on Monday.
“The agreed-upon objectives must be achieved,” he said.
Under the current conditions, Greece has to cut 11.5 billion euros (US$14.5 billion) — the equivalent of 5 percent of its GDP — by 2014 although Greek parties wants this deadline to be pushed forward to 2016.
Speaking on the sidelines of the G20 summit in Los Cabos, Mexico, senior US official Lael Brainard said “there is ample room for both sides to sit back down” and hammer out a new deal giving Greece more time to meet its obligations.
“We expect to see on the part of the European partners and the IMF recognition that Greece’s program has gone off-track for some period of time in part because they had a protracted political process,” she said.
Many Greeks are gloomy about their country’s future.
“There is no Greek politician who can get the country out of this mess. Not one!” said Panayotis Dimopoulos, a pensioner in the streets of Athens.
“Samaras and Venizelos have already shown us that they can sign whatever [German Chancellor Angela] Merkel wants,” he said.