Greek Socialist fails to form government, vote beckons

Fri May 11, 2012 11:00pm EDT

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* Venizelos meets president at 1000 GMT

* Final chance to avert election

By Deepa Babington

ATHENS, May 12 (Reuters) - Greek Socialist leader Evangelos Venizelos on Saturday becomes the last political leader to throw in the towel after failing to cobble together a government, leaving the country's president with one final chance to avoid new elections.

Greece's political landscape is in disarray after voters humiliated the only parties backing a rescue plan tied to spending cuts, leaving no bloc with enough seats to form a government to secure the next tranche of financial aid.

Without the aid, the debt-stricken country risks bankruptcy in weeks and a potential exit from the euro zone.

Venizelos - who personally negotiated the much-hated bailout package with lenders - was the third leader to attempt and fail to form a government this week, after the conservative New Democracy and radical leftists SYRIZA both admitted failure.

A greatly weakened New Democracy and Venizelos' PASOK party, which finished an embarrassing third in Sunday's election, had hoped to renew their pro-bailout coalition but fell two seats short of a majority in parliament.

Their hopes of coaxing one of the anti-austerity leftist parties into a coalition went up in smoke after the small Democratic Left refused to join without the participation of SYRIZA, which laughed off any suggestion of joining.

"It is not the Left Coalition that has refused this proposal, but the Greek people who did so with their vote on Sunday," said SYRIZA leader Alexis Tsipras, whose party was catapulted to second place on its anti-austerity rhetoric.

Venizelos is due to meet President Karolos Papoulias on Saturday at 1000 GMT to give up his mandate. The president then faces the task of summoning each leader from parties that made it to parliament - from the Communists to the extreme-right Golden Dawn - to see if a coalition can be stitched together.

That process could take days, and analysts say the most likely scenario remains fresh elections in mid-June. That could worsen Greece's prospects for avoiding bankruptcy, and hand 37-year-old ex-Communist Tsipras an even bigger share of the vote, according to the first poll published since Sunday's result.

The opinion poll showed SYRIZA would win with 27.7 percent of the vote, almost 11 points up on its Sunday result, consolidating votes from smaller anti-bailout groups. Placing first would automatically win him an extra 50 seats at the expense of pro-bailout parties.

Tsipras wants to rip up the bailout which ties Greeks to years of wage, pension and spending cuts, even though the country's European partners have warned that would come at the price of cutting off funds keeping Greece afloat.

"I think it is going to be increasingly presented as a vote to effectively leave the euro. That's how it will be seen outside of Greece and the rhetoric will build up to ensure that voters are aware of the implications," said Chris Williamson, chief economist at London-based research firm Markit.

"We're likely to hear: If you want to stay in Europe you need to stick to our rules; you can't have a situation whereby you escape the obligations with regards to debt and remain in the euro area."

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