Amid worries that a second round of voting will also end in deadlock, Greeks are withdrawing savings from local banks.
By Andy Dabilis for Southeast European Times in Athens -- 17/05/12
The failure of Greece's wrangling political parties to form a coalition government in the wake of the stalemated May 6th elections has led President Karolos Papoulias to put the country in the hands of a caretaker administration until new polls on June 17th.
The interim leader, Council of State President Panayiotis Pikramenos, who is also a judge, will struggle to keep calm in the country as fears build that the political instability could drive Greece out of the eurozone.
Feuds over austerity measures -- supported by the once dominant New Democracy conservatives and PASOK socialist parties, but opposed by the other five parties that won enough of the vote to gain seats in parliament -- stymied attempts to create a coalition. Papoulias's attempts to convince the parties to settle on a government of "personalities" to be led by a technocrat also failed.
Greece has been ruled since November by a shaky coalition that started with three parties but wound up in an uneasy New Democracy-PASOK hybrid. It suffered setbacks in the polls amid voter anger over pay cuts, tax hikes and slashed pensions and gave no party a mandate.
The deeply-indebted country is surviving on a first round of 109 billion euros in rescue loans from the EU-IMF-ECB Troika, which is set to begin a second bailout of 130 billion more, but only if the next government implements more austerity and cuts another 12 billion euros in spending. Any attempt to tinker with reforms, the Troika said, could lead to the money pipeline being shut off.
Such is the level of worry in Greece, suffering from a deep recession, 21.7% unemployment and the closing of 1,000 businesses a week, that frantic Greeks withdrew 700m euros from the country's floundering bank sector since May 7th.
Bank of Greece Governor Giorgos Provopoulos reportedly said that "fear could turn into panic," and create a run on banks that are so cash-starved that they need to be recapitalised.
Equally troubling is the prospect that the next election will result in another roadblock.
"I'm scared," Kostas Ifantis, an associate professor of international relations at the University of Athens told SETimes. "We can only hope that Greeks will find minimum rationality the next time they go to the polls."
New Democracy won the May 6th elections, but with only 18.8% of the vote -- not enough to form a government -- and tried to work out a coalition with its usually bitter ideological rival, PASOK.
Between them was the surprise second-place finisher, the Coalition of the Radical Left known as SYRIZA, an anti-austerity party led by a 37-year-old former land surveyor, Alexis Tsipras, who soared on populist rhetoric demanding an end to the punishing measures. He blocked attempts to create a government that he said would lack legitimacy without his group.
Tsipras dared eurozone leaders to make good on threats to end Greece's aid. He said they would be forced to renegotiate the bailout terms if they didn't want to bring down the economic bloc of the 17 countries that use the euro.
His view seems to be gaining traction. "People generally believe that [the Troika] will not force us to leave because the cost to the European or global economy would be too high," said Ifantis.
But Paul Donovan, a global economist with UBS Bank, warned on CNN that "If Greece exits the euro, it won't be alone … there would be bank runs across multiple countries."
Platon Tinios, an assistant professor of economics at the University of Piraeus, says there's too much uncertainty to gauge what will happen. "The idea is that people voted with their hearts the first time and will vote with their heads the second time," he told SETimes.
But, he added, "It could be a repeat of the previous election, pushing even more towards an impasse."