Greece set for new elections on June 17

Head of administrative court to be caretaker prime minister

Greece will go to the polls for the second time in just six weeks on June 17, the Athens News Agency said Wednesday, as fears grew of more instability over the troubled country's future in the eurozone.

State-controlled ANA said Council of State president Panagiotis Pikrammenos, the head of Greece's top administrative court, will be caretaker prime minister and organise the ballot after a May 6 poll failed to produce a government ready to implement in full a tough EU-IMF bailout accord.

French-educated Pikramenos, 67, a former prime ministerial advisor, told AFP that he would create a team of 12-13, including some outgoing ministers along with other judges.

Greece and the world's financial markets had been anxiously awaiting the date for new polls amid growing fears the cash-strapped nation could be forced out of the 17-member eurozone.

The tough austerity measures included in the 240-billion euro ($300 billion) EU-IMF deal saw voters desert the main Pasok and New Democracy parties which had supported the bailout in a technocratic government formed last November.

While fixing an election date at least removes one uncertainty, a host of problems remain, both for Greece and the wider eurozone.

There is no guarantee that the new vote will produce a viable government and Syriza, which has threatened to tear up EU-IMF deal, is tipped to win after surging into second place in the May 6 election.

News that about 700 million euros ($890 million) had been withdrawn from Greek banks on Monday stoked the tensions, with investors fearful that a Greek euro exit would be chaotic for everyone.

Christian Schulz of Berenberg Bank said the withdrawals suggested that Greeks were "getting increasingly worried about the country's future in the euro".

On their own they "do not indicate panic quite yet. However, this could change soon, so that the central bank would have to step in to save the banks."

Commerzbank analysts said the risk of a "Grexit" -- an uncontrolled Greek default and eurozone exit -- had increased with the holding fresh polls.

Press reaction was subdued, reflecting the feeling that while most Greeks want to stay in the eurozone, they cannot live with more spending cuts which have already triggered strikes and sometimes violent demonstrations.

The centre-left daily Ethnos wrote that Greece was heading for "elections in a minefield. The result will determine the country's future in the eurozone."

The election "will test the patience of Greece's partners on whether the country will stay in the eurozone," financial daily Naftemoporiki said.

There was little comfort found in a pledge by German Chancellor Angela Merkel, made alongside new French President Francois Hollande at their first meeting Tuesday, that "we want Greece to stay in the euro".

Merkel said the two European powerhouses were also prepared "to study the possibility of additional growth measures in Greece" if Athens sought them.

But on Wednesday German Finance Minister Wolfgang Schaeuble insisted once again that it was not possible to renegotiate the EU-IMF deal, the second in two years aimed at averting bankruptcy.

"Greece must be ready to accept the (EU-IMF) aid... Those who win the elections will have to decide if they accept the conditions or not," he said.

European Commission head Jose Manuel Barroso made the same point.

"There is no way of changing the commitments taken by Greece and also by the other 16 euro area member states," he said.

The euro tumbled on Wednesday to a four-month low of $1.2681 but later recovered to $1.2748, edging up as stock markets steadied in afternoon European trade.

"There is a pervading sense of unease in financial markets," National Australia Bank said, noting "increasing outflows from its (Greece's) banking sector and broader discussion of contagion effects," it said.

"The concern now is regarding contagion. It's not Greece per se that is the problem but the credibility of the euro as a currency."

That contagion effect was showing up most strongly in Spain, struggling to stabilise its banking sector and get its economy growing again, where government borrowing costs were rising sharply.

The yield, or rate of return, on 10-year Spanish government bonds jumped to 6.495 percent at one stage, well above the 6.0 percent level widely considered to be unsustainable in the long term.

Spanish Prime Minister Mariano Rajoy, mindful of his own problems, said it "would be an enormous mistake" if Greece were to leave the eurozone.

"It would be bad news and I think we have to guarantee the sustainability of public debt and then all of us comply with our commitments," he added.
 

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