Greek conservative calls for broad new coalition

Associated Press
Head of Greece's radical left-wing Syriza party Alexis Tsipras waves to his supporters in Athens, late Sunday, June 17, 2012. Alexis Tsipras and his party shot to prominence in the May 6 vote, where he came a surprise second and quadrupled his support since the 2009 election. Syriza party has vowed to rip up Greece's bailout agreements and repeal the austerity measures, which have included deep spending cuts on everything from health care to education and infrastructure, as well as tax hikes and reductions of salaries and pensions.   (AP Photo/Petros Karadjias)

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ATHENS, Greece (AP) — Europe looked on with wary relief Monday as Greek conservative leader Antonis Samaras launched coalition talks after coming first in a vote that follow weeks of uncertainty over whether the debt-crippled country could remain in the joint euro currency.

A Greek exit from the 17-nation eurozone would have potentially catastrophic consequences for other ailing European nations and hurt the United States and the entire global economy as well.

European Union leaders appeared relieved that a pro-austerity government had a good chance of being formed.

"Continued fiscal and structural reforms are Greece's best guarantee to overcome the current economic and social challenges," European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso said in a joint statement.

But an early market rally faded quickly Monday as investors turned their attention back to the other financially unstable economies in the eurozone — Spain and Italy.

In Athens, stocks lost initial strong gains but were still 4.5 percent up in afternoon trading.

Sunday's vote "will probably ease fears of an imminent Greek euro exit," said Martin Koehring of the Economist Intelligence Unit. "But the key question is how quickly can a government be formed?"

With 129 of Parliament's 300 seats, the conservative New Democracy party lacks enough legislators to govern alone, and must seek allies among the pro-bailout Socialists, who came third. Samaras, who now has three days in which to build a coalition, said he wanted to form a government with long-term prospects.

"My position is that there must be a national salvation government with as many parties in it as possible," he said after talks with Alexis Tsipras, leader of the radical left Syriza party. "I will continue the effort because the country has an immediate need of being governed."

But Tsipras, whose party came in second on Sunday, quickly rejected Samaras' proposal to join in his coalition.

"Our strategies are opposed," Tsipras said. Under the 37-year-old former student activist, Syriza campaigned on a pledge to scrap Greece's bailout commitments.

Still, the coalition deal that evaded Samaras after an inconclusive election on May 6 looks more attainable this time. With the Socialists' backing he would control 162 seats, and could seek a further boost from the small Democratic Left party.

The Democratic Left has opposing Greece's harsh austerity program but has said it will do what is needed to help form a strong government.

On the streets of Athens, the mood was mixed, with many saying party leaders must get their act together.

"The election result isn't strong enough to put people's minds at ease," said sandwich shop owner Mary Moutafidis, 57. "They still have to agree to form a government."

Final results gave New Democracy 29.66 percent, followed by Syriza at 26.89 percent. The extreme far-right Golden Dawn party, whose members have been linked with violent attacks on immigrants, came fifth with 6.92 percent; it won 18 seats — down from the 21 it collected on May 6.

Greece has survived for more than two years on rescue loans from its European partners and the International Monetary Fund. The vital bailouts are conditional on the country continuing with its deeply unpopular package of spending cuts, and pushing through new structural reforms.

Athens has pledged to push through new savings worth nearly €15 billion ($18.9 billion)raise billions in company and real estate privatizations and sack about 150,000 civil servants.

Both New Democracy and the Socialists want an extension of at least two years to the austerity and reform deadline, to alleviate pressure on a population exhausted by two-and-a-half years of deep income cuts and tax hikes.

Unemployment has soared to more than 22 percent, while Greece's economy is in a fifth year of deep recession.


Menelaos Hadjicostis and Dalton Bennett in Athens, Phill Tutt in London and Sarah DiLorenzo in Brussels contributed.

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