Euro exit threat hangs over Greece

REUTERS

File photo

Greeks readied for their second election in six weeks with all the top candidates now calling for renegotiation of a bailout deal despite warnings that Greece must toe the line or leave the euro.

Sunday's election will be watched around the world amid concern over the shockwaves that a Greek euro exit would send through the global economy and will play into talks by European leaders divided on how to resolve the debt crisis.

“To be or not to be in the eurozone? That is the question,” said Lucas Papademos, a former prime minister and European Central Bank vice-president, paraphrasing William Shakespeare's Hamlet as Greece's own tragedy unfolds.

The New Democracy conservatives and Syriza radical leftists have been running neck-and-neck in the polls for an election which was triggered by an inconclusive vote on May 6 in which no party could form a governing coalition.

Unofficial recent polls have given a slight advantage to New Democracy - a rumour that led to a 10.1-percent rally on the Athens stock market on Thursday.

That boost petered out on Friday, however with the market down 1.0 percent.

New Democracy leader Antonis Samaras, 61, presents himself as the guarantor for Greece's membership in the eurozone although he says he wants to renegotiate the “memorandum” - a bailout deal that has imposed harsh austerity conditions.

In return for the cut, Greece has been given an international credit lifeline - first for 110 billion euros in May 2010 and then for 130 billion euros earlier this year plus a 107-billion-euro private debt write-off.

“What is at stake in this election is clear: euro or drachma, coalition government or no government,” Samaras said in one of his campaign speeches.

He has said he could lead a coalition of other centre-right parties and the Socialist Pasok party, which would broadly support the bailout deal.

Syriza leader Alexis Tsipras has called for the deal to be torn up although he has moderated his message in recent days and is now also calling for renegotiation.

Samaras “has guaranteed (German Chancellor Angela) Merkel's Europe of the past. We guarantee the Europe of the future,” he told thousands of supporters at his final campaign rally as they chanted: “The hour of the left has arrived!”

Syriza has managed to bring together “all those who have been hit by austerity,” said Meri Primi, a 45-year-old teacher in Athens.

“We want the euro but we also want to live,” said Primi, whose salary has been cut 400 euros to 1,100 euros ($1,400) a month over the past two years.

Tsipras has given himself 10 days after the vote to renegotiate the bailout in time for the European summit in Brussels on June 28

and 29.

European leaders and in particular Merkel have said there is no room for renegotiation but officials privately say there is wiggle room and a willingness to meet Greece's needs to relaunch its economy after five years of recession.

“The terms of the compromise, which is to be signed between now and September, would add another two years on the target for fiscal consolidation,” a former adviser to Papademos told AFP on condition of anonymity.

Political analyst George Sefertzis said: “Either we find a solution for a new austerity plan that is more realistic and functional or we will find ourselves at an impasse... Without growth, we can't reduce deficits or debt.”

Greece's creditors are taking no chances and have suspended the latest 2.6-billion-euro tranche of bailout until after the election amid concern in some quarters of prolonged political deadlock in Athens.

Scenarios on how Greece could exit the euro - a notion that is rejected by 80 percent of Greeks - have multiplied in recent weeks.

The latest one by Deutsche Bank said the critical period when Greece runs out of money could come “at the end of June or beginning of July.”

Under that scenario, there would be an extraordinary session of parliament that would impose capital controls, give new powers to the Bank of Greece and authorise the printing of a new devalued currency. - Sapa-AFP