Greece's president will ask politicians on Tuesday to stand aside and let a government of technocrats steer the nation away from bankruptcy, but leftists have already rejected the proposal and look set to force a new election they reckon they can win.
Party leaders, deadlocked since a parliamentary vote nine days ago, will convene at the presidential palace at 2 p.m. (1100 GMT) but said they had little hope President Karolos Papoulias's offer would resolve a political crisis that has fuelled speculation Greece's days in the euro zone are numbered.
The political landscape has been in disarray since an inconclusive election on May 6. This divided parliament between supporters and opponents of EU/IMF bailouts which staved off bankruptcy but piled up wage cuts and tax increases on Greeks, deepening the country's recession.
If supporters and opponents of the bailout cannot agree a government, Papoulias will call a new election in June, when Athens must agree over 11 billion euros in extra austerity cuts to stick to targets in the bailout plan.
Jean-Claude Juncker, who chairs the Eurogroup of euro zone finance ministers, dismissed on Monday the prospect of a Greek euro exit as "propaganda". Juncker seemed to open the door to some softening of the austerity plan, saying a new government could potentially raise the question of extending deadlines, as long as it was still firmly committed to its targets.
But many senior European politicians and European Central Bank policymakers now openly speak about the scenario of a euro exit - until recently a taboo subject - and warn that their patience with the Greek political drama is wearing thin.
Dutch Finance Minister Jan Kees de Jager said his government had studied the scenario of a Greek departure from the euro zone although Europe's policy was to keep the country in the bloc.
Greek newspapers also expressed impatience with the political deadlock. "We are running out of time to form a government of national salvation which would ensure that the country stays in the euro zone and would try to gradually pull it out of the crisis," conservative daily Eleftheros Typos said.
The bailout's main opponents - the radical leftist SYRIZA party which now leads opinion polls - said they saw the president's plan for a government of non-partisan experts as nothing but a scheme to impose the austerity demanded by the European Union and IMF but already rejected by voters.
"We will attend the meeting. But we are sticking to our position. We don't want to consent to any kind of bailout policies, even if they are implemented by non-political personalities," SYRIZA spokesman Panos Skourletis said.
The prospect that a future Greek government would renege on promises made in return for bailout funds sent European shares sliding and Spanish and Italian bond yields higher on Monday.
The euro slipped to a four-month low against the dollar on Tuesday morning, although data showing surprisingly strong economic growth in Germany eased the selling pressure on shares and commodities.
Investors fear a Greek exit from the euro would pile risks on other euro zone economies with debt problems.
A government source in Athens said on Tuesday that the state would repay 430 million euros in bonds that mature on May 15.
The money will go to some members of a relatively small group of private investors who refused to take part in a bond swap completed in March. Other bond holders agreed to a sharp reduction of the value of their debt in the swap, which was made under Greece's second bailout.
Papoulias, 82, named a technocrat prime minister six months ago when Greece's two biggest parties - the conservatives and socialists - joined forces to secure the bailout. But both parties were punished in the election, and those which oppose the bailout now are stronger, angrier and in no mood to compromise.
Socialist leader Evangelos Venizelos, whose party commanded a majority in the outgoing parliament but was reduced to third place behind SYRIZA, backed the technocrat proposal but expressed doubt it would succeed.
"It's not normal to have a government by technocrats or personalities but when you are in such a crisis, in such a dead end, we have to accept this as well," he said on Monday, adding: "Things are very difficult. I'm not optimistic."
The moderate Democratic Left party, which has enough seats to offer pro-bailout parties a majority but has refused to join a coalition without SYRIZA, rejected the president's suggestion.
"I told the president that a government by technocrats or personalities would suggest the failure of politics, and raised my objection," party leader Fotis Kouvelis said.
There are powerful incentives for the EU to keep Greece afloat, not least that the ECB and euro zone governments are major holders of Greek government debt and a hard default could leave them with heavy losses.
Anger against austerity has spread across Europe and Greek police detained a small about 10 anti-austerity activists from France and other European countries on Tuesday who had slept overnight on the main Athens square in front of parliament.
($1 = 0.7726 euros)
(Additional reporting by Tatiana Fragou, Harry Papachristou and Renee Maltezou; Writing by Peter Graff and Ingrid Melander)
Comments - 0
Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.