Greek vote plunges bailout, euro membership into doubt
(BRUSSELS) - The rise of anti-bailout parties in Greece threw the country's debt rescue into fresh doubt on Monday as markets wavered and European partners worried over revived risks of a eurozone exit.
"We see significant potential for a new Greek government to miss the next round of targets," said economist Guillaume Menuet of Citi, referring to tough budget cuts and reforms agreed in exchange for 240 billion euros of international rescue funds.
Menuet cited a sharply-raised, 75-percent "probability" of what he labelled "Grexit" within 12-18 months.
Pro-bailout mainstream parties on the right and left failed to secure a majority in parliament with a combined share of the vote of just 32.1 percent while far-left and far-right groups made enough gains to acquire significant bargaining power in talks to form a coalition.
German Chancellor Angela Merkel said it was "of utmost importance" that Greece stick to the reform course agreed with its international backers, despite the votes of Greek citizens.
In Berlin, she said: "At its core, the discussion is about not whether we need budget consolidation or growth -- it is absolutely clear we need both," she told reporters.
"Rather, I think the core of the debate lies in whether we need debt-financed stimulus programmes or whether we need growth measures that are sustainable and lead to an improvement of the economic strength of individual countries."
European Commission spokeswoman Pia Ahrenkilde Hansen said that the Brussels executive "hopes and expects that the future government of Greece will respect the engagements that Greece has entered into."
And EU economy commissioner Olli Rehn's spokesman underlined that "solidarity is a two-way street."
In Athens, Conservative New Democracy leader Antonis Samaras said the goal was to assemble "a national salvation government" that would "keep the country in the euro," and "amend" the bailout terms.
"May the God of Greece help us," said Socialist Pasok leader Evangelos Venizelos, the finance minister in caretaker premier Lucas Papademos' pre-election administration.
In its fifth year of recession with unemployment at 20 percent, the Greek state has signed a deal with the European Union and the International Monetary Fund to find another 11.5 billion euros ($15 billion) in savings over the next two years.
However, "the parties that signed the memorandum are now a minority," said leftist Syriza head Alexis Tsipras. "The public verdict has de-legitimised them" after sending a "message of overthrow."
Neo-Nazi Golden Dawn leader Nikos Michaloliakos said his party would fight against "world usurers" and the "slavery" of a bailout he likened to a "dictatorship" -- adding that "the time for fear has come."
Australia-based Chris Weston of IG Markets said the rise of these two parties "tells of a country that is on the brink," highlighting the neo-Nazis' call for land mines on the Greek-Turkish border.
ING's Paolo Pizzoli tipped a bid by an "exploratory" coalition to obtain some softening of conditions. But he warned "the process might prove a long one as the European counterparties themselves will likely have to find a new equilibrium after the French presidential result," increasing risk of "market turbulence."
European leaders have focused primarily on Francois Hollande's victory in France, as moves gather pace to re-balance austerity with new policies designed to accelerate economic growth.
The economies of Spain, Italy and France are each causing significant concern across the eurozone -- with the latest data indicating growth has flatlined in powerhouse Germany.
Panayotis Petrakis, economics professor at Athens University, expressed hope that Hollande "would prevent Europe treating (Greece) too harshly. There is still a little room for manoeuvre."
After shares fell worldwide and the euro wavered -- Greece's stock market plunging 8.3 percent -- Japan's finance minister Jun Azumi warned of "destabilising" reactions to events in Athens and Paris, warning traders against speculative currency moves.
One EU official expressed the hope that a two-year "obsession" with appeasing markets would give rise to fresh "appetite" for unblocking EU-level investments aimed at raising growth.
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