Fresh talks in Greece as fears of euro exit grow

Traders on the New York Stock Exchange on Monday Markets worldwide have fallen over fears the political turmoil could lead to Greece leaving the euro

Greece is holding further talks 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.

However European markets took some relief on Tuesday from news that the eurozone managed to avoid recession, recording zero growth in the first three months of the year.

Data from Eurostat showed stronger-than-expected growth in Germany helped to make up for contraction in Greece, Italy and Spain.

'Taboo broken'

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 who said "I don't envisage, not even for one second, Greece leaving".

But commentators say the fact that it is being openly discussed means a taboo has been broken in Brussels.

Analysis

Greece's wait goes on. One proposal under discussion is that of the president to form a government of technocrats, made up of what are described as "distinguished and non-political figures".

That has received a mixed reaction from some parties, aware that many Greeks resent the country's outgoing prime minister for being an appointed technocrat rather than an elected leader. But the politicians appear too divided to serve together in a coalition - split over whether to adhere to or reject Greece's bailout agreement and further cost-cutting.

If these last-ditch talks fail, Greece will face fresh elections, prolonged political instability and possibly a slide towards an exit from the euro. Greece's president appears determined to try everything he can to avoid it.

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 Monday's 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 not include Syriza.

But all four are attending Tuesday's talks, as is the Greek Independent party - meaning only the Communists (KKE) and far-right Golden Dawn are 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.

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.

Voters are anxious for the political crisis to end - speaking in Athens Yannis Panagiotopoulos said: "The politicians are putting their parties above the country and that's very bad".

Argiro Kraea who is against the bailout deal added " I have been unemployed for 14 months... having New Democracy and Pasok again, which had the bailout deal before, they are doing the same thing again and they are trying to form a government... Tsipras (leader of Syriza) was right not to participate."

Deadline looming

Our correspondent in Athens says the chances of success at this 11th hour are slim, as Thursday's deadline approaches.

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.

Greek election results graphic

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