UPDATE 1-Greek parties scramble to avert new vote

Fri May 11, 2012 3:50am EDT

Related Topics

* Socialist and conservative leaders meet early Friday

* Attempt to form coalition government looks doubtful

* Final effort required before new elections called

* Poll shows elections would give victory to radical leftist

By Harry Papachristou and Peter Graff

ATHENS, May 11 (Reuters) - The leaders of Greece's once-dominant political parties make their final effort on Friday to form a coalition and avert a new election, which a poll showed would all but wipe them out and give victory to a radical leftist who rejects an EU bailout.

The overwhelming majority of Greeks want to stay in the euro zone but voted last Sunday for parties that reject the severe terms of a bailout negotiated last year. European leaders say Greece will be ejected from the common currency if it turns its back on the package of tax hikes and wage cuts.

Socialist PASOK leader Evangelos Venizelos, whose party once towered over Greek politics but placed a distant third in the election, will be the last politician given a chance to form a government.

He was due to meet conservative rival Antonis Samaras, whose New Democracy party came first in the election, but who has already failed to form a coalition. If Venizelos fails as well, all parties will have one last chance to try before a new election must be held in the coming three to four weeks.

PASOK and New Democracy jointly negotiated the 130 billion euro ($168.5 billion) EU/IMF bailout in a reluctant coalition last year and now are the only parties in parliament that support it.

Enraged voters punished them by reducing their combined share of the vote from 77 percent to 32 percent at last Sunday's election, leaving them two seats short of forming a coalition government.

Samaras and Venizelos may be hoping Greeks, frightened by the prospect of hasty ejection from the euro, will return to the two traditional mainstream parties if the election is re-run next month.

But a new poll showed the main beneficiary of a new vote would be the hardline Left Coalition SYRIZA, whose leader Alexis Tsipras rejects the bailout and has demanded it be torn up.

The first opinion poll to be published since the election showed SYRIZA would win with 27.7 percent of the vote, almost 11 points up on their election result, consolidating votes that had been split among smaller anti-bailout groups.

Under a rule designed to make it easier to form a government, the party that places first gets 50 bonus seats in the 300 seat parliament.

Those seats went to New Democracy on Sunday. If SYRIZA were to win them in a new election, the marginalisation of the once-mighty parties would be complete and it would be impossible to form a government supporting the bailout.

ECUMENICAL GOVERNMENT

Venizelos's hope of reaching a last-ditch deal have rested with the Democratic Left party, a small moderate splinter group.

But its leader, Fotis Kouvelis, insisted on Friday he would not join a coalition with the pro-bailout parties unless anti-bailout parties were also included and the new government pulled out of the loan deal.

"Our proposal for an ecumenical government seeks to ensure the participation of all those forces that can serve two aims: the gradual disengagement from the loan agreement and staying in the euro zone", Kouvelis told Skai TV.

One socialist party official said on Thursday there was a "very slim" chance for a coalition if Kouvelis agreed, "but his party is split right down the middle."

The political deadlock has prompted warnings by European leaders that Greece could be thrown out of the euro if it does not stick to the spending cuts and economic reforms required by the bailout.

German Finance Minister Wolfgang Schaeuble said Europe and the International Monetary Fund were still determined to help Greece, but the country could not be helped if it did not help itself.

The EU and IMF say they will not give Greece any more money under the bailout until it has a government in place that renews its commitment to the terms agreed last year. Greece could run out of money as soon as the end of June if the loans stop.

"We do not have an infinite amount of time. Time is flying because there are financing needs, but the first steps have to be taken now from the Greek side," European Central Bank governing council member Ewald Nowotny said in Vienna.

A senior SYRIZA party official said European leaders were bluffing by threatening to eject Greece from the euro to force it to stick to the bailout terms.

"Not only can't Greece be kicked out of the euro, they will be begging us to take the money," because if Greece were kicked out the crisis would spread to other European countries and the euro would collapse, said Dimitris Stratoulis.

The prospect that Greece might declare bankruptcy and be pushed out of the euro caused panic across the single currency zone last year. But since then, European banks have written off the value of most of their Greek debt, which makes them less susceptible to shock if Greece should default.

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