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Left-wing leader rejects Greek austerity pledge
ATHENS, Greece -- The debate over European austerity flared hotter Tuesday as the left-wing politician trying to form a new Greek government declared that his country is no longer bound by its pledges to impose crippling cutbacks in return for rescue loans.
The comments by Alexis Tsipras flew in the face of EU leaders' insistence on fiscal discipline and sent the Greek stock market tumbling just two days after Greek voters rejected mainstream pro-austerity politicians. Instead, the people backed a hodgepodge of parties from the Stalinist left to the neo-Nazi right but produced no clear winner in parliament.
Tsipras also demanded an examination of Greece's still-massive debt and a moratorium on repayment of the part of it that is "onerous," statements that rattled investors and drove Greek shares down another 3.6 percent on top of Monday's nearly 7 percent loss. Markets in France, Italy, Germany and the U.S. also fell.
"The pro-bailout parties no longer have a majority in parliament to vote in destructive measures for the Greek people," said the 38-year-old Tsipras, whose anti-austerity Radical Left Coalition party came second in Sunday's vote. "The popular mandate clearly renders the bailout agreement invalid."
Tsipras is the second Greek party leader in as many days to try to form a government. If no coalition can be found, elections will be held in a month, with the political instability boding ill for Greece's hopes of staying solvent and within the 17-nation eurozone.
Moving to stomp out signs of increasing discontent in crisis-stricken countries, the European Union and Germany -- the biggest contributor to the EU's crisis fund -- urged members Tuesday to stick to their agreed budget cuts.
"The end of the debt policy has been agreed in Europe. It has to stay that way," said German Foreign Minister Guido Westerwelle. European Commission President Jose Manuel Barroso stressed that member states must implement their promised spending cuts and tax increases.
Both offered the consolation of new efforts to revive struggling economies. EU President Herman Van Rompuy called for an informal summit of the EU's 27 leaders May 23 to discuss economic growth and to prepare for a summit in June focused on job creation.
Tsipras' party came in second Sunday, winning 52 of parliament's 300 seats with 16.8 percent of the vote. He has the presidential mandate to end the political impasse by forming a governing coalition by Thursday.
Antonis Samaras, head of the winning conservative party that has 108 seats, gave up on the same task after just a few hours Monday when Tsipras spurned his advances.
Tsipras said his government-building drive would focus on ending "the loan agreements of subservience" with Greece's international bailout creditors.
Greece has depended on rescue loans from its European partners and the International Monetary Fund since May 2010, after decades of profligate state spending and poor financial management priced it out of money-lending markets.
To secure the bailouts, Athens took a hatchet to pensions, salaries, health care and pretty much everything else, while repeatedly raising taxes. But more than two years of austerity have left the economy deep in recession and unemployment at a record high 21 percent.
Tsipras urged Samaras and third-placed Socialist leader Evangelos Venizelos to renege on their support for the bailout commitments, asking them to "honestly repent for their disastrous choices that tore our society apart."
Greece has promised to pass new austerity measures worth $18.9 billion next month and to implement other swift reforms. These will promptly be reviewed by its creditors, who will then decide whether to release or withhold the next batch of bailout funds.
But Samaras quickly blasted Tsipras' proposal as "unbelievably arrogant," warning it would "drag the country into chaos" and see it expelled from the eurozone.
"Mr. Tsipras is doing everything to prevent a government being formed," Samaras said. "Nothing can be done if we leave the euro, because the country's catastrophe would be certain and unprecedented."
He added: "He is asking me to place my signature on the destruction of Greece. And that I will not do."
Analysts agreed that Tsipras was wading into dangerous waters.
Athanasios Vamvakidis, a strategist at Bank of America Merrill Lynch, said Greece's rescue creditors are unlikely to agree easily to a renegotiation of the two bailout programs worth $312 billion.
Just two months ago, banks and other private creditors wrote off over (euro) 100 billion ($130 billion) in Greek debt -- the largest debt writedown in history.
However, other analysts suggested that the eurozone and IMF could give Athens a minimal lifeline of credit while Greece sorts out its political impasse or holds new elections.
But even then, there is little reason to believe that angry Greek voters would change their minds in a second ballot and give a comfortable majority to the pro-austerity parties New Democracy and PASOK, said Neil Mellor, an analyst at the Bank of New York Mellon.
Even if the two eked out a slim majority in the next election, they could not enforce the current bailout terms, he added.
Dimitris Mardas, an associate professor of economics at Thessaloniki University, said he believed there was room to negotiate a coalition government.
"They are professionals, not children," he said.
But it would be mathematically impossible for Tsipras to govern without the support of Samaras' conservatives, because the isolationist Communists have ruled out any participation in government and no party will work with the neo-Nazi Golden Dawn.
If Tsipras fails, the mandate would then pass to Venizelos. If he is also unsuccessful, party leaders will hold a final effort to reach consensus. And if nothing comes from that, elections will take place within a month.
Associated Press writers Derek Gatopoulos and Elena Becatoros in Athens, Raf Casert in Brussels and Carlo Piovano in London contributed to this report.