Greek crisis deepens with no breakthrough in coalition talks

Greek political party leaders emerged late Sunday from emergency cabinet talks with no breakthrough in sight, raising the prospect of new elections that could scupper reforms and force the country out of the eurozone.

President Carolos Papoulias initially met for 90 minutes with the heads of the three parties that topped last last Sunday's inconclusive election -- conservative New Democracy, socialist Pasok, and radical left Syriza, before holding discussions with smaller parties.

But after the full day of last-ditch meetings, the small Democratic Left party, viewed as the most likely candidate for a coalition government with New Democracy and Pasok, said no government had emerged from Sunday's discussions.

Talks will reopen on Monday, said state TV, as Greece grapples with mounting threats of a loan freeze should Athens falter on promised structural reforms.

If a cabinet cannot be formed by Thursday, when parliament convenes, new elections will have to be called in June.

Some of the leaders said Papoulias had produced a letter from outgoing prime minister Lucas Papademos on the state of the Greek economy, whose contents he declined to divulge outside the meeting.

According to local media, the state has enough cash to pay salaries and pensions until late June. Greece's European peers have threatened to cut off further loans if promised reforms stall.

"The president told me that sadly, until this point there has been no potential to form a unity government," said Fotis Kouvelis, whose Democratic Left party was seen as the most likely candidate for a coalition government between the mainstream conservative and socialist parties.

His party wants any coalition government to "immediately" cancel legislation that slashed the minimum wage and facilitated layoffs, and start to "disengage" Greece from the unpopular EU-IMF rescue package.

Another key party, Syriza, which wants to tear up an agreement signed by Greece, the European Union and the International Monetary Fund in 2010 to save Athens from bankruptcy, has refused to cooperate altogether.

But Syriza, Democratic Left, New Democracy and Pasok will meet Papoulis Monday for another push at doing a deal.

Ahead of Sunday's meeting with Papoulias, conservative chief Samaras said Greece should aim for a two-year interim coalition government that would keep the country in the eurozone amid growing threats from Athens' EU peers and creditors.

"The Greek people have given us a mandate to cooperate to change policy whilst staying in the eurozone," Samaras told reporters.

"A mandate to cooperate for a viable government at least until European parliament elections" in 2014, he added.

Those comments echoed remarks by Pasok leader Evangelos Venizelos who told Papoulias that his party, New Democracy and the Democratic Left could form a temporary two-year government to keep Greece in the eurozone.

Another goal would be to "drastically" improve the terms of a second EU-IMF rescue package, he added.

On Saturday, Papoulias said there were "grains of optimism" that a coalition between these three parties, which would have 168 deputies in the 300-seat parliament, could be formed.

But "things are rather difficult," he told Venizelos, while noting that Greece had to be represented at a eurozone finance ministers' meeting on Monday, an EU summit on Friday and a NATO meeting on Sunday.

A new poll published hours before the meetings showed that Greeks were now desperate for a coalition government that will safeguard eurozone membership.

Seventy-two percent of those who responded said parties should cooperate "at all costs," according to a Kappa Research poll published in the Greek weekly To Vima.

In response to a separate question, 78.1 percent said the new government should do "whatever it takes" to keep Greece in the eurozone.

International creditors have warned that no new payments under the latest 130-billion euro ($168-billion) bailout will be made if Greece falters on structural reforms required to put the economy back on track after decades of overspending by the state.

On Saturday, German central bank governor Jens Weidmann said: "If Athens doesn't keep its word, it will be a democratic choice.

"The consequence will be that the basis for fresh aid will disappear."

Deeply indebted Greece is torn over tough austerity measures imposed as conditions for two EU-IMF bailouts, and the crisis has raised the spectre of Greece defaulting and even leaving the 17-member eurozone.

Voters last Sunday punished the mainstream parties and left a fractured political landscape.

Pasok and New Democracy, which pushed through austerity measures in the previous coalition government, only won a combined 149 seats in the 300-member parliament.

Opinion polls show that the anti-austerity Syriza party would lead in a new election.

On Friday, Brussels revised downwards its economic forecasts for Greece.

The European Commission said the Greek economy, now in its fifth year of recession, could contract by another 4.7 percent this year and see zero growth in 2013.

The credit rating agency Fitch warned that the emergence of a Greek government "unwilling or unable to abide by the terms of the current EU-IMF programme would increase the risk of Greece leaving the eurozone."

Greece has committed to finding another 11.5 billion euros in savings over the next two years. It also needs to reimburse 435 million euros in maturing debt on May 15.


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