Greece starts work on new polls

2012-05-18 12:38

Athens - Greece gets down to work on Friday on preparing its second election in just six weeks, with its partners hoping for a conclusive result so as to ease growing eurozone strains that have snagged Spain and Italy.

A caretaker government took office on Thursday after an inconclusive 06 May vote left Greece in limbo, pushing the financial markets and euro down sharply.

The concern now is that the new poll on 17 June offers no guarantee of a viable government able to implement an EU-IMF bailout which sharply divided the country while Spain tries to keep the wolves at bay and Italy is caught up too.

Panagiotis Pikrammenos, 67, the head of Greece's top administrative court, heads the government and has put together a cabinet of mainly prominent university professors, plus a retired general and a diplomat.

"We must all work to steer the country to a safe harbour," Pikrammenos told the cabinet on Thursday, announcing there would be no pay for their work and that they should set an example of frugality in hard times.

"The country must honour the obligations it has undertaken. It cannot abrogate its obligations without reason and cause a major crisis.

"We must not forget that all of Europe is watching us," he said.

Opinion polls

All of Europe is certainly watching closely as the Greece crisis drives fresh turmoil on the markets, rocking Spain as the government there tries to stabilise a banking sector crippled by a mountain of property loans gone bad.

As Spain has faltered, hit on Thursday by rumours of a run on deposits at its fourth largest bank, Bankia, so Italy has been drawn into the vortex, with its banking sector falling sharply on the day as well.

Reports of withdrawals worth $890m from Greek banks on Monday rattled markets similarly but a banking source on Thursday downplayed their importance.

From the 06 May polls to Monday, there had been withdrawals of €800m, the source said, noting that in March there was an inflow of €1.0bn, with April estimated at the same amount.

The source, who asked not to be named, also said that €18bn in funds due under the bailout for the recapitalisation of Greek banks was expected by Tuesday or Wednesday.

Some of the market volatility may have been explained by opinion polls showing the radical leftist Syriza party, which wants to drop the EU-IMF deal and its austerity measures, in first place with 24.5% of the vote, up from its 16.78% showing on 06 May when it came second.

A Pulse poll for Pontiki satirical weekly said the conservative New Democracy party and the socialist Pasok, the mainstream parties who supported the EU-IMF debt rescue, would get 21.5% and 15.5% respectively.

The EU and the International Monetary Fund, all that stand between Greece and a disorderly default and eurozone exit, have warned that no new funds will be released from the latest €240bn bailout if progress on pledged reforms and tough austerity measures falters.

Fitch Ratings agency cited the prospect of another inconclusive election and Greece being forced out of the eurozone to cut its rating of Greece on Thursday to 'CCC' or vulnerable to default.

"In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-IMF programme of fiscal austerity and structural reform, an exit of Greece from EMU would be probable," the rating agency warned.

Emerging split

However European leaders appeared to move on Thursday towards resolving an emerging split over how to deal with the crisis, agreeing in a videoconference that both growth and cutting budget deficits are needed.

Adding growth measures to the new EU budget-cutting fiscal pact has been a key goal of new French President Francois Hollande.

Boosting central EU investment funds, as is under consideration, could provide a boost to Greece's struggling economy, which is in its fifth year of recession as both the government and households cut back on their spending.