Evangelos Venizelos, the socialist PASOK leader and former finance minister, will try to form a government when he receives a three-day mandate from President Karolos Papoulias.
PASOK on Wednesday rejected terms for a government set by Alexis Tsipras, of Greece’s anti-bailout Syriza party, which then gave up its bid to build a coalition.
“There is no time to lose,” Venizelos said in Athens on Wednesday on state-run NET television. “We can’t take any decisions that worsen the recession, increase unemployment or endanger the real economy. That means no new elections, no instability, no uncertainty to remain in the euro.”
The standoff has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010.
With Parliament split and policymakers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.
Tsipras, whose party came second in the May 6 vote, failed to reach a deal with other party leaders after giving them an ultimatum to renounce support for the European Union-led rescue in order to enter government.
New Democracy leader Antonis Samaras, whose party came in first, gave up trying to forge a coalition after six hours of talks Monday.
“New elections are the most likely possibility,” said Spyros Economides, a senior lecturer at the London School of Economics. “The coalition math from the May 6 vote just doesn’t add up.”
Tsipras demanded Samaras and Venizelos send a letter to the EU revoking their written pledges to implement austerity measures. Both Samaras and Venizelos rejected the request. Samaras said he was being asked “to put my signature to the destruction of Greece.”
European governments cannot force Greece to stay in the euro if Greek citizens decide to leave, German Finance Minister Wolfgang Schaeuble said.
“They will decide whether to stay in the euro zone or not,” Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels Wednesday. “If Greece decides not to stay in the euro zone, we cannot force Greece.”
The repercussions of a euro-exit are “potentially huge,” said Gillian Edgeworth, a London-based economist at UniCredit. “The chances of Spain needing official aid would increase, with implications for spillover to others.”
The risk of Greece leaving the euro by the end of 2013 has risen to as high as 75 percent, Citigroup said Monday.
Greece’s benchmark ASE Stock index fell 0.9 percent to 615.12 in Athens Thursday, after losing about 10 percent in the previous two days. The Standard & Poor’s 500 Index declined 0.7 percent to 1,354.58, trimming an earlier tumble of as much as 1.5 percent. The Stoxx Europe 600 Index lost 0.3 percent after sliding 1.4 percent. The euro depreciated 0.6 percent to $1.2930, trading below $1.30 for the third day.
New Democracy and Pasok, rivals until the country’s crisis made them pro-bailout partners in a national government last year, are two deputies short of the 151 seats needed for a majority in the 300-seat chamber. New Democracy won the election with 19 percent of the vote, gaining 108 seats, thanks to a rule that gives the first-place party 50 extra seats.
Syriza came second with 17 percent, winning 52 seats, and Pasok placed third with 13 percent, or 41 seats. Five parties opposed to bailout policies are represented in parliament.
The Communist Party of Greece, which opposes Greece’s membership in the European Union and has refused to join any coalition government, called for fresh elections to be held yesterday to put an end to the “charade” of the parties trying to form a government.
Under Greece’s election system, the president can give each of the three top vote-winning parties a mandate to form a government that can last for as many as three days. If the process still fails to yield a coalition, the president must try to broker a government of national unity, the constitution says. If that fails, new elections are held.
Tsipras had said he aimed to link up with parties in a government that would nationalize banks, place a moratorium on debt payments and cancel the bailout and measures such as labor reforms and pension cuts.
Samaras said that his party is prepared to support a minority government as long as it ensures Greece’s membership in the euro and its national interests.
Venizelos said Pasok’s proposal for a national unity government with all parties with a pro-European orientation was the only solution. Greece must remain “safely” within the euro while pursuing changes to the bailout accord to boost growth, he said.
International creditors called on Greek leaders to hold to the agreed terms of their EU-International Monetary Fund bailouts.
“Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone,” European Central Bank Executive Board member Joerg Asmussen was quoted as saying in an interview with Germany’s Handelsblatt newspaper published Wednesday.
For now, bailout money is still flowing to Greece. The European Financial Stability Facility Thursday confirmed that a 5.2 billion-euro tranche will be released by the end of June, with 4.2 billion euros disbursed today. The remaining 1 billion euros will be released depending on Greece’s financing needs.
_ With assistance from Tom Stoukas, Natalie Weeks, Jonathan Stearns, Antonis Galanopoulos and Eleni Chrepa in Athens, James Neuger in Brussels, Jana Randow in Frankfurt and Brian Parkin and Rainer Buergin in Berlin.