A police officer places outside the Greek parliament an anouncement of the parliament's dissolution in Athens on December 31, 2014
Athens (AFP) - Greece's parliament was dissolved Wednesday ahead of an early election watched warily by markets and international creditors concerned that the austerity-weary country could starting unwinding unpopular fiscal reforms.
A statement from the chamber said the election would be held on January 25 -- as announced Monday by Prime Minister Antonis Samaras -- and the new parliament would reconvene on February 5.
Samaras had warned Tuesday that the financially-stricken nation may be forced out of the eurozone if the election is won by radical leftist party Syriza which has vowed to reverse years of austerity imposed in return for financial aid.
"This struggle will determine whether Greece stays in Europe," Samaras told President Karolos Papoulias.
On Wednesday, Samaras warned again that Syriza planned "not to pay interest rates, and therefore to lead the country to a payment default and bankruptcy".
His assertion followed comments by two Syriza officials alluding to a debt repayment freeze if Greece's creditors refuse to renegotiate the country's bailout deal.
"Perhaps we shall not pay. Because we will negotiate and say that this programme is not viable," Yiannis Milios, the party's economic policy head, told Antenna TV.
Another party cadre, Yiannis Tolios, told Action 24 TV: "It's in our party platform, we may decide to stop paying interest rates on maturing debt."
Fears of a potential Greek exit from the eurozone have already rattled markets and sparked concern throughout European Union capitals.
Greek stocks closed down almost four percent when the election was announced on Monday, after losing a massive 11 percent earlier in the day.
On Wednesday the bourse finished 1.23 percent higher.
It was parliament's failure to choose a new president in three successive votes this month that triggered the snap poll.
As its first order of business, the new chamber must elect a successor to 85-year-old Papoulias, whose five-year term ends in March.
In his New Year's message to the nation, the outgoing president said the country still faced uncertainty.
"We still find ourselves in a position of uncertainty, because there are significant issues pending in the negotiations" with EU-IMF creditors, Papoulias said.
He said Greece had to find a "new balance" in its relationship with its creditors but also "safeguard" its position at the heart of Europe.
- 'No alternative' to austerity -
Syriza, currently the front-runner in opinion polls, has pledged to unwind many of the reforms imposed by Greece's creditors -- the so-called "troika" of the International Monetary Fund, European Union, and European Central Bank -- by cutting taxes and increasing state aid and public services.
The last election in 2012 plunged Greece into weeks of political uncertainty, and there are fears of a repeat next month given the close race between Samaras' conservative New Democracy party and Syriza.
Opinion polls indicate Syriza leads New Democracy by three to six points.
A new SKAI TV poll on Wednesday gave the leftists 29.5 percent against 25 percent for New Democracy.
However, analysts note that even if Syriza was to win it would still probably need to form a coalition -- and to do so, it would have to tone down some of its rhetoric to find a partner.
Syriza had dismissed warnings that its electoral programme would rattle markets and creditors, but within hours of the election being called on Monday, the IMF said it was suspending further bailout payments to Greece until a new government was formed.
The European Union has renewed its calls on Greeks to stick by the often painful reforms adopted as part of a massive international bailout for the eurozone member state.
German Finance Minister Wolfgang Schaeuble was more direct in warning the cash-strapped country against abandoning the agreed economic reforms, saying "they have no alternative".
Greece recently secured a two-month extension to February from its EU-IMF creditors to conclude a fiscal audit that will determine the release of some 7.0 billion euros ($8.5 billion) in loans.
A new extension is now likely to be required if Syriza comes to power, outgoing Finance Minister Gikas Hardouvelis said this week.