Greece to hold new elections after coalition talks fail

ATHENS: Attempts to form a government in Greece collapsed yesterday, jolting financial markets at the prospect that leftists opposed to the terms of an EU bailout could sweep to victory in a June election and tip the euro zone deeper into crisis.
The turmoil in Athens sent shock waves around other troubled members of the 17-nation European single currency area. The euro slipped below $1.28, world stocks slid and Spanish and Italian bond yields rose above the danger level of 6 percent as investors scurried for shelter in safe haven German Bunds.
The tremors from Greece, compounding worries about Spain’s debt-laden banking system, ended any honeymoon for new French President Francois Hollande, thrusting the growing risks to the euro zone to the top of the agenda for his first meeting with German Chancellor Angela Merkel hours after he took office.
In his inaugural address, the Socialist president called for a European pact to revive growth and temper German-driven austerity measures, seeking to change the direction of euro zone economic policy.
“I will propose to our partners a pact that will tie the necessary reduction of our public debt to the indispensable stimulation of our economies,” Hollande declared, saying Europe needed “projects, solidarity and growth”.
The French leader’s aircraft was struck by lightning shortly after takeoff from a military airport near Paris en route for Berlin, forcing him to turn back and take a substitute plane.
In Athens, President Karolos Papoulias abandoned efforts to broker a compromise on a cabinet of technocrats to steer the country away from bankruptcy, nine days after an inconclusive general election. A caretaker government will now be formed pending a new vote probably in mid-June.
“We resisted in every way,” said Alexis Tsipras, leader of the hard-left Syriza party, which surged to second place in last week’s election on an anti-austerity platform and blocked any deal with pro-bailout mainstream parties.
“We made the decision to not betray your hopes and your expectations,” said Tsipras, emboldened by opinion polls showing his party could top the poll in a second vote. “Now it’s time to complete it. We will consign in the dustbin of history all the spent forces of the past.”
Euro zone finance ministers dismissed talk of Greece leaving the single currency area as “propaganda and nonsense” on Monday. But with hostility to EU/IMF-imposed austerity rising in Greece, speculation about a possible state bankruptcy and euro exit is rattling financial markets and won’t go away.
IMF chief Christine Lagarde said it was important to be technically prepared for the possibility of Greece leaving the euro zone, warning that such a move would be “quite messy” with risks to growth, trade and financial markets.
Finnish Prime Minister Jyrki Katainen openly discussed the prospect, telling broadcaster MTV3, “If Greece were to leave the euro it would probably not cause a significant financial crisis that would have happened a couple of years ago.