The results of the French election are going to bring a lot of trouble to the euro zone in due course, but, for now, it’s Greece that has overtaken Spain to reclaim its place as the single currency’s most dangerous stress point.
Greece is bracing for a repeat general election after its centre-right leader failed to win leftwing support to form a “national salvation government” in the wake of Sunday’s inconclusive outcome at the polls.
“We are now heading for a second vote next month in a deeply polarised atmosphere,” said a disappointed government official. The repeat election would probably take place on June 17, he said.
The failure of Greece’s two main pro-bailout parties to win a majority compounds a deteriorating economic situation as the government of Lucas Papademos, the technocrat premier, prepares to leave office next week, making way for a caretaker administration.
“Only non-political measures can go ahead,” the official said, admitting that it will be hard to push forward with 77 separate structural reforms due to be completed during June.
The stalemate puts at risk the timetable for disbursement of Greece’s next loan tranche from its second €174bn bailout. Despite a recent transfer of €3.5bn to cover financial emergencies, the country faces being unable to meet pension, salary and debt commitments next month.
Can the hard left (led by the surging Syriza party) form an alternative government? Best guess is no. The FT reckons that the Syriza leader Alex Tsiparas’s ambitions to form his own coalition of leftwing parties “appear doomed to fail… with the Greek Communists prefering self-isolation. The Democratic Left split from Syriza several years ago and shows no sign of wanting to team up again.”
As a reality (or unreality) check, remember this:
[A]nti-austerity parties [captured] almost 70 per cent in Sunday’s vote.
Tick tock.