Greek Leaders Meet on Election After European Stocks Drop (Update 1)

A Greek caretaker government agreed on in Athens today will prepare new elections probably on June 17, said Greece’s Democratic Left leader Fotis Kouvelis amid concern the country will abandon the euro common currency.

Panagiotis Pikrammenos, head of Greece’s Council of State, the highest administrative court, will head the caretaker administration, Independent Greeks leader Panos Kammenos said after talks with other party leaders in Athens. Kouvelis told reporters the transitional government won’t pass laws.
“The days between now and the new elections, which unfortunately, we were unable to avoid, are days of responsibility,” said Evangelos Venizelos, the head of the socialist Pasok party. “Responsibility because Greece must be kept upright. The situation for Greeks can’t worsen and this isn’t easy or simple.”

The new voting will follow inconclusive May 6 elections that pushed a political party opposed to Greece’s international bailout into second place. Public opinion polls say that party, Syriza, may come in first next time, complicating Greece’s efforts to avoid running out of cash by early July.

President Karolos Papoulias failed to broker a governing coalition in meetings yesterday with Venizelos and other party leaders in Athens. The euro plummeted to an almost four-month low, while the Stoxx Europe 600 Index fell to its lowest level since December.
Possible Euro Exit

The standoff has reignited concern the country will renege on pledges to cut spending as required by the terms of its two bailouts worth 240 billion euros ($306 billion) negotiated since May 2010, and, ultimately, leave the 17-nation euro area.

German Finance Minister Wolfgang Schaeuble said the Greek people and the nation’s future government would have to decide whether they’re prepared to accept the bailout conditions.

“There are no easy ways to solve Greece’s problems,” Schaeuble said in a Deutschlandfunk radio interview today. “If Greece wants to stay in the euro — and that’s something that we all wish for — then that’s the way it has to be. But that requires that Greece has a functioning government that is prepared to go this way.”

Greece’s benchmark ASE Index fell 0.3 percent to 561.02 at 2:46 p.m. in Athens, its fourth day of declines. The Stoxx Europe 600 Index (SXXP) lost 0.4 percent heading for its third day of losses. The euro fell 0.1 percent to $1.2723.

“A second vote means Greece is edging closer to the point where it’s inevitable they have to exit the euro,” Fredrik Erixon, head of the European Centre for International Political Economy in Brussels, said in a phone interview. “No other course of events is now likely.”
‘Catastrophe’

Greece must be part of the euro area and it would be a “catastrophe” for the nation to revert to its own currency, a move that threatens a run on banks, former Greek Prime Minister Costas Simitis said.

“There’s no question we must belong to the euro zone,” Simitis, who led Greece when it joined the euro in 2001, said at a forum in Beijing yesterday. “The idea of coming back to the drachma is an idea that cannot function.”

Europe must reexamine its policy of austerity and acknowledge it has failed, Alexis Tsipras, who heads the anti- bailout Syriza party, said May 14 in an interview broadcast on state-run Athens News Agency’s website.

“We ask that our country remain in the euro without the catastrophic policy of austerity and we have the solidarity of Europe,” Tsipras said. “I can’t guarantee that the euro area itself and the euro will be united and exist.”
Syriza Tops Polls

Opinion polls conducted since the last election suggest that Syriza would come in first in a rerun, though short of an outright majority. Syriza would have 20.5 percent of the vote if elections were held now, according to a survey of 1,002 people by Rass SA for the newspaper Eleftheros Typos May 14, the fourth poll to show the party with such a lead.

That survey showed support for New Democracy, which placed first in the May 6 election, at 19.4 percent and Pasok dropping to 11.8 percent from 13.2 percent. More than eight in 10 said they wanted Greece to remain in the euro area. The poll was conducted on May 10 and May 11. No margin of error was given.

Antonis Samaras, leader of Greece’s New Democracy party, said yesterday after the failed bid to form a government that the terms of Greece’s bailout must be changed.

The election left New Democracy and Pasok, the two parties that supported the international rescue in an interim government this year, two deputies short of the 151 seats needed for a majority in Parliament.

The country will run out of cash by early July if partners decide to withhold their next aid payment. The European Financial Stability Facility on May 9 confirmed that a 5.2 billion-euro tranche will be released by the end of June, with 4.2 billion euros already disbursed May 10. The remaining 1 billion euros will be released depending on Greece’s financing needs.