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May 10, 2012, 05.12 AM IST | Source: Reuters

Greek socialist makes last-ditch attempt at government

GREECE-EVANGELOS-VENIZELOS-TSIPRAS:Greek socialist makes last-ditch attempt at government

By Dina Kyriakidou

ATHENS (Reuters) - Greek Socialist leader Evangelos Venizelos will make a last- ditch attempt to form a government on Thursday and avoid a new election after voters rejected a bailout deal and pushed Greece into a political crisis.

Chances are slim Venizelos can clinch a deal after both the conservatives and leftists tried and failed to cobble together a coalition in three days of talks following Sunday's election, when voters spurned big parties and their austerity policies.

The political deadlock prompted European threats to eject Greece from the euro, while impatient governments withheld part of the latest tranche of rescue funds to be paid to Greece on Thursday.

New elections in 3-4 weeks loom as Athens, due to run out of cash in June, needs to impose fresh measures in exchange for funds.

"I will continue the effort because it is in the nation's interest," Venizelos told reporters. "Prolonging this uncertainty only hurts the country and its economy, and in the end, the weakest and the unemployed."

But the mood was sombre when radical Left Coalition leader Alexis Tsipras abandoned his efforts after meeting main political leaders and a raft of new groups propelled into parliament by public anger at mainstream parties. The biggest party, New Democracy, tried and failed to form a workable coalition within hours on Monday and there seemed to be little ground for compromise between the pro- and anti-bailout parties, split almost down the middle in the new parliament.

Tsipras demanded that New Democracy and PASOK, which ruled Greece for decades and were ravaged in Sunday's poll, tear up the pledges they made in return for the bailout, which they rejected out of hand.

DIRE WARNINGS

European Central Bank policymaker Ewald Nowotny, said Greece could not be helped if it would not help itself, in a stern warning that euro exit was in the cards.

Most Greeks may oppose the tough terms of a 130 billion euro IMF/EU bailout agreed in February but want to stay in the euro.

European governments kept the country solvent for the moment by agreeing to make a 4.2 billion euros payment on Thursday from the region's bailout fund to enable Athens to meet short term bond redemptions. But, in a sign of growing displeasure at the impasse in Athens, a further 1 billion euros was withheld, probably until next month.

Angela Merkel, leader of euro zone paymaster Germany, said in a newspaper interview that she wanted Greece to stay in the common currency but it must stick to the terms of the bailout.

Many Greeks seemed unfazed by the crisis created by the election, but some expressed alarm.

"People voted with anger not with reason," said 51-year-old widow Maria Savelona. "Tsipras lives in his own world. God help us, what is this? I'm afraid we will be kicked out of the euro and he thinks he is our saviour?"

Greece's turmoil, and the prospect that it could revive the euro zone debt crisis, helped drive the euro towards a three-month low and pushed down global shares.

(Additional reporting by Karolina Tagaris, Renee Maltezou and George Georgiopoulos; Editing by Giles Elgood)

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