Analysis: Election promises no end to Greece's agony

ATHENS (Reuters) - Greece's mainstream parties may defeat a radical leftist leader whose policies could force the country out of the euro, but victory in the election on June 17 is unlikely to be conclusive and another vote may be on the horizon.

The upstart leftist SYRIZA party is running neck-and-neck with conservative New Democracy ahead of the second national election in six weeks as Greece reels from a debt crisis that is shaking the euro to its core.

Even if New Democracy, which is currently slightly ahead in opinion polls, can form a government with support from the socialists and perhaps others, it is thought likely to buckle under the weight of the enormous task ahead.

"We are talking about postponing the inevitable for a short time," said political analyst John Loulis. "It won't last more than a few months."

Enraged with mainstream parties that have imposed the harsh cuts prescribed in the 130 billion euro ($162.03 billion) rescue deal from international lenders, Greeks overwhelmingly backed smaller parties, putting the radical left into second place in an inconclusive election on May 6.

SYRIZA has been telling Greeks that the European Union is bluffing when it threatens to cut off its aid lifeline unless Athens takes painful reform measures. Party leader Alexis Tsipras's pledges to nationalize banks and reverse budget cuts have led markets and international lenders to compare him to Venezuela's president, Hugo Chavez.

Greeks themselves are increasingly skeptical of his anti-markets rhetoric and Tsipras may not be able to capitalize on his recent success. Even if it does win, SYRIZA is likely to find that the state's coffers are empty and its term of office will be short-lived.

Greeks have been ready to take to the streets in violent protests against the austerity measures prescribed by the European Union and the International Monetary Fund. But opinion polls show that while most oppose the terms of the bailout they still want Greece to stay in the euro, something that Tsipras says he can offer.

But international lenders have made clear that Athens must meet its reform pledges if it is to receive further loan installments. The government has warned it may run out of cash as early as this month.

VENTING ANGER

In the May 6 election, politicians underestimated public anger over decades of mismanagement and corruption and paid the price for running traditional left versus right campaigns.

This time, parties are scrambling to woo voters on a pro or anti-bailout platform. Tsipras rejects the rescue deal that has plunged Greece into its worst recession in decades, while New Democracy leader Antonis Samaras insists that would mean certain exit from the euro.

"This round is like a runoff election, with the two of them going for top spot," said Takis Theodorikakos, head of GPO pollsters. "SYRIZA is sticking to its guns, trying to rally leftist voters, and New Democracy is campaigning on a euro-or-drachma dilemma."

Opinion polls show a good measure of public anger has been vented in the first election and voters are reluctantly returning to the bigger parties, but the result is still far from certain.

The battle will be fought over membership of the euro, as rage against the two main parties has waned and Greeks are slowly realizing they face an impending catastrophe.

"I don't believe in Samaras but there is no other option for the country," said Nektarios Yiavasoglu, a 52-year-old Athens dentist who will vote for New Democracy. "It's the only way to stay in Europe. Tsipras looks like he's set on ruining the country."

DRACHMA OR EURO

Samaras, whose insistence on calling an election last month by tacitly withdrawing support from the coalition of technocrat prime minister Lucas Papademos led to the political impasse, wants to renegotiate parts of the bailout with a view to boosting growth.

Sources at New Democracy say he hopes to rally all the pro-bailout parties if he comes first on Sunday.

"We want the bailout to change but we want to stay in the euro," a party aide said. "The debate is about drachma or euro, catastrophe or growth."

Although the party that wins the most votes gets an extra 50 deputies in the 300-seat parliament, none is seen winning outright and another round of painful negotiations will almost certainly follow the vote.

Parties will however be under more pressure to form some kind of government this time around as people are fed up with repeated elections.

A New Democracy government, with the support or tolerance of the PASOK socialists who came third in May after ruling the country for decades, would face a Herculean task.

Greece must come up with an additional 11 billion euros of budget cuts by June, improve tax collecting to make up for massive levels of evasion, and push through a series of long overdue market and labor reforms in order to collect more money from the EU and the IMF.

With an emboldened SYRIZA stepping up protests and special interest groups such as lawyers and pharmacists - traditionally pro-New Democracy - resisting the liberalization of their professions, the conservatives are unlikely to make much headway and SYRIZA may be playing a longer game.

"The moves will be half hearted and the bailout installments will be delivered drop by drop," Loulis said. "Tsipras will be biding his time, waiting for New Democracy to collapse so he can win outright." ($1 = 0.8023 euros)

(Additional reporting by Karolina Tagaris; editing by Giles Elgood)