Fresh talks in Greece as fears of euro exit grow

BBC

http://www.bbc.co.uk/news/world-europe-18068189

Further talks are due in Greece amid a scramble to try to secure a workable government following inconclusive elections nine days ago.

Leftist parties have signalled their opposition to joining a coalition that would stick to unpopular austerity policies in exchange for bailouts.

The president has proposed a government of technocrats, but party leaders are pessimistic any deal can be reached.

The political turmoil has spooked markets around the world.

Heavy losses in Europe and the US on Monday were followed by falls in Asia on Tuesday morning.

If the cliff-edge talks fail, Greece will face fresh elections, prolonged political instability and possibly a slide towards an exit from the euro.

The stakes could not be higher, says the BBC's Mark Lowen in Athens. If Greece leaves the euro, the whole ideological framework governing monetary union could begin to unravel.

Such a scenario was rejected as "nonsense" by the chairman of the eurozone group, Luxembourg Prime Minister Jean-Claude Juncker, on Monday - but commentators say the fact that it is being openly discussed means a taboo has been broken in Brussels.

The tumbling euro means other countries risk spiralling into further crisis. Borrowing costs in Spain are nearing dangerous levels, correspondents point out.

Coalition elusive

Tuesday's talks come in the wake of Monday's discussions between the leaders of the centre-right New Democracy, Pasok and moderate Democratic Left parties which ended in failure after just an hour.

The left-wing Syriza bloc - the second largest in parliament - did not attend the talks, saying it would not join any coalition making further cuts. It rejects the terms of the latest 130bn-euro (£105bn; $170bn) EU/IMF bailout, which demands more austerity.

Democratic Left, which could have used its handful of seats to cement a majority government, has instead insisted it will not join any coalition which does include Syriza.

All four parties are due to attend Tuesday's talks, and local media said the Greek Independent party would also take part - meaning only the Communists (KKE) and far-right Golden Dawn will be absent.

President Karolos Papoulias has proposed a technocratic government made up of what are described as "distinguished and political figures".

But many Greeks resent the fact that the outgoing Prime Minister Lucas Papademos - who oversaw the implementation of the bailout - was appointed and not elected.

But Syriza and the Democratic Left have expressed opposition to the suggestion, while Pasok leader Evangelos Venizelos has said he is "not optimistic" agreement will be reached.

Our correspondent in Athens says the chances of success at this 11th hour are slim.

Failure would mean fresh elections which, polls suggest, could usher in a Syriza-led government that turns its back on Greece's bailout.

That could lead the country into a default on its debt and hasten Greece's departure from the euro, our correspondent says.

Eurozone finance ministers meeting in Brussels on Monday reaffirmed their commitment to Greece staying in the euro.

But they warned Athens must stick to the terms of the bailout if it wants to receive further injections of funds to stave off state bankruptcy and retain the single currency.