Divided Greece hurtles towards new elections

People walk past of the Greek parliament on May 16, 2012. After inconclusive elections and fruitless political horse-trading, debt-laden Greece will finally name a government Thursday, but only to hold the fort until fresh polls next month. © AFP Louisa Gouliamaki

ATHENS - After inconclusive elections and fruitless political horse-trading, debt-laden Greece will finally name a government Thursday, but only to hold the fort until fresh polls next month.

A caretaker government of technocrats and retired politicians, headed by a senior judge, will have the sole task of organising a fresh election on June 17, some six weeks after the last polls.

, the head of Greece’s top administrative court, was the compromise choice after ten days of talks between political leaders failed to produce a coalition government.

Aside from being aptly named to head the fragmented country, Pikrammenos — “embittered” in Greek — takes over with Greece once again at the crossroads.

A growing segment of the population has had enough of austerity after two years of salary and pension sacrifices which have failed to bring the promised economic benefits within sight.

Newly appointed caretaker Prime Minister Panagiotis Pikrammenos (R) is welcomed by outgoing Prime Minister Lucas Papademos at the Premier's office in Athens on May 16, 2012. Greece put a senior judge in charge of an emergency government to lead it to new elections on June 17 and bankers sought to calm public fears after the president said political chaos risked causing panic and a run on deposits © AFP Aris Messinis

But officials from the European Union and the International Monetary Fund, which are all that stands between Greece and a disorderly debt default — and a possible exit from the euro currency zone — have warned daily that no new loans will be released if progress on pledged reforms falters.

“It is clear to all that our homeland is going through difficult times. We must safeguard its prestige and assure a smooth transition,” said Pikrammenos, whose cabinet is to be sworn in at 0700 GMT on Thursday, after accepting the mandate from President Carolos Papoulias.

The new parliament will convene an hour later, but given the brevity of its mission, its 300 deputies will remain unpaid for the duration of their term.

Greece and the world’s financial markets had been anxiously awaiting the date for new polls amid growing fears the cash-strapped nation could be forced out of the 17-member eurozone.

“The country is on a knife’s edge,” said the Hellenic Federation of Enterprises, one of Greece’s main business lobby groups.

In a sign of the growing paralysis feared by creditors and investors alike, the agency overseeing state asset sales — another condition for EU-IMF funds — on Wednesday suspended its operations until a fully fledged government is in place.

“The board of directors decided that, in the course of the current period, and until the formation of a government as a result of the forthcoming elections, it will not take any decisions which commit the fund,” the Hellenic Republic asset development fund said.

It added that observers from the EU and the eurozone had “expressed their concern” about this decision.

Tough austerity measures included in a 240-billion euro ($300 billion) EU-IMF deal for Greece saw voters on May 6 desert the main Pasok and New Democracy parties which had supported the bailout, and the strings attached to it.

But there is no guarantee that the re-run vote will produce a viable government and left-wing Syriza, which has threatened to tear up the EU-IMF deal, is tipped to win after surging into second place in the May election.

German Finance Minister Wolfgang Schaeuble has insisted once again that it is not possible to renegotiate the EU-IMF deal, the second in two years aimed at averting bankruptcy.

Growth, public deficit and debt, and unemployment forecasts for Greece © AFP Graphic

“Greece must be ready to accept the (EU-IMF) aid… Those who win the elections will have to decide if they accept the conditions or not,” he said on Wednesday.

European Commission head Jose Manuel Barroso made the same point.

“There is no way of changing the commitments taken by Greece and also by the other 16 euro area member states,” he said.

“In these elections Greeks will vote on whether Greece should stay in the eurozone or not,” outgoing finance minister Philippos Sachinidis said.

British Prime Minister David Cameron will on Thursday renew his call for eurozone leaders to take decisive action or face the break up of the single currency over the Greek debt crisis.

The euro sank to a four-month low against the dollar Wednesday amid the ongoing concerns that debt-wracked Greece will leave the euro, spreading financial contagion throughout the eurozone.

In New York the euro was changing hands at $1.2715 around 2100 GMT, down from $1.2728 at the same time Tuesday, after plunging to $1.2681 during the day.

A poll released on Wednesday, before the party talks collapsed, showed that 59 percent of those questioned would have preferred the formation of a coalition government, while 32 percent favoured new elections.

The VPRC poll for online magazine epikaira.gr also found that 69 percent of respondents were unhappy with the result of the last election, which put seven parties in parliament including a neo-Nazi group.

The radical leftist Syriza party still tops the list with 20.3 percent of the vote, building on the 16.78-percent result gained two weeks ago.