Talks to Form Greek Coalition Government Collapse – New Elections Expected as Euro Zone in Turmoil

Greek President Karolos Papoulias has announced that talks to form a coalition, technocratic government have failed and new elections are expected. Evangelos Venizelos, leader of the Panhellenic Socialist Movement (PASOK), has presided over three failed coalition talks and is now instrumental in forming a caretaker government to chaperone Greece into its next round of elections.

The reaction of currency markets was immediate, with the euro falling to less than $1.25 for the first time since January and other continental currencies like the Swedish krona are experiencing fluctuations in response to the Greek uncertainty as well. Yields on German bonds tumbled while Italian and Spanish sovereign debt became increasingly risky for investors and more expensive for those two beleaguered euro zone partners.

Opinion polls show ultra-leftist Syriza will perform well in a June election, potentially placing first, but will still fall short of its necessary mandate to form a government. Syriza leader Alexis Tsipras has reiterated his promises to reject further austerity, adding to investors’ doubts about the country’s recovery.


[Financial Times]