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Greek opposition tries to form government but election looms

(Agencies) Updated: 2015-08-21 20:09

Greek opposition tries to form government but election looms

Greek Prime Minister Alexis Tsipras is received by Greece's President Prokopis Pavlopoulios (unseen) in Athens, Greece, August 20, 2015. Tsipras resigned on Thursday, hoping to strengthen his hold on power in snap elections after seven months in office in which he fought Greece's creditors for a better bailout deal but had to cave in. [Photo/Agencies]

ATHENS, Greece -?Greece's president asked the main opposition party Friday to try to form a new government, a day after Prime Minister Alexis Tsipras resigned and called an early election next month to deal with a governing party rebellion over Greece's third bailout deal.

The opposition has few chances of uniting and forming a government, meaning that after more than five years of a worsening financial crisis, Greece is headed for its fifth national election in six years. Tsipras is widely tipped to win the vote, though if he fails to secure an outright majority he could have to seek a new coalition that could hamper his ability to govern.

Hardline lawmakers in Tsipras' radical left Syriza party announced Friday they were splitting from the party and forming their own anti-austerity movement, which becomes the third largest group in Parliament.

Outgoing government officials say the likeliest election date is Sept. 20, just eight months after Tsipras was elected on promises to fight creditor-demanded spending cuts and tax hikes, terms he later agreed to in order to secure Greece a third bailout and keep it from falling out of the euro.

It will be the third time this year that Greeks vote, after January elections and a July 5 referendum Tsipras called urging voters to reject reforms that creditors were proposing during the bailout negotiations.

Greece's European creditors did not appear dismayed by Tsipras' move, which was widely expected.

"The step by Prime Minister Tsipras isn't surprising" considering he has lost his majority in parliament, said Steffen Seibert, spokesman for German Chancellor Angela Merkel. "The bailout program is a program that was agreed with the Hellenic republic ... and it will be valid through election dates."

German Finance Ministry spokesman Juerg Weissgerber said that if there were delays in implementation of the bailout agreement due to the elections, "then it would mean that the next payments are delayed too."

Funds from Greece's new three-year, 86 billion euro ($95 billion) bailout are being disbursed in batches following reviews of the country's progress on implementing reforms. The first installment was released Thursday so Athens could meet a debt repayment to the European Central Bank, and a first review is expected in October.

On Friday, President Prokopis Pavlopoulos met conservative New Democracy party head Evangelos Meimarakis and asked him to try to form a government. Meimarakis has three days to seek coalition partners, after which the third largest party in Parliament would a chance for a further three days at most.

The third largest party is now the new movement formed by the 25 lawmakers who split from Syriza Friday. The group, named Popular Unity, will be led by former energy minister Panagiotis Lafazanis.

Meimarakis also met with the speaker of Parliament to seek her contribution in trying to cobble together a government and avoid early elections.

However, it is unlikely that Meimarakis or the new party will be able to form a government. At that point, Parliament will be dissolved and a caretaker government appointed to lead the country to early elections within a month.

Announcing his resignation in a televised address Thursday, Tsipras said he secured the best deal possible when he agreed to the new bailout from other eurozone countries to save Greece from a disastrous euro exit.

The deal, however, came with strict terms for more spending cuts and tax increases.

Tsipras' reversal in accepting such terms for the bailout caused outrage among Syriza hardliners. About one in four Syriza lawmakers refused to back the bailout's ratification in Parliament last week, which was only approved with backing from opposition parties.

Malcolm Barr of J.P. Morgan noted that if Tsipras and his Syriza party return to office, as expected, they would do so without the hardliners and would seek out a moderate coalition partner that would help implement the bailout program.

However, he said, "the downside of new elections is that they will slow the implementation of measures."

That could delay the first review of the country's reforms progress, and in turn delay talks on easing the terms of Greece's debt, which both Athens and the International Monetary Fund, which was a major participant in Greece's previous two bailouts, insist is essential.

The political uncertainty is taking its toll on Greece's stock market, with the Athens Stock Exchange down 1.6 percent in mid-day trading, after closing 3.5 percent down Thursday on election speculation.

Tsipras had delayed a decision on whether to call a new election until after Greece received its first installment from the new bailout and made a debt repayment to the European Central Bank; it did both Thursday.

"Now that this difficult cycle has ended ... I feel the deep moral and political obligation to set before your judgment everything I have done, both right and wrong, the achievements and the omissions," he said.

Tsipras insists he had to accept the unpalatable bailout terms to keep Greece in the euro, the EU's common currency. He is betting on a stronger mandate if polls are held before voters feel the impact of the new steep tax hikes and spending cuts.

He acknowledged Thursday the bailout deal was not what his government had wanted.

"I wish to be fully frank with you. We did not achieve the agreement that we were hoping for before the January elections," he said. "But ... (the agreement) was the best anyone could have achieved. We are obliged to observe this agreement, but at the same time we will do our utmost to minimize its negative consequences."

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