Monday, June 18, 2012

Greek voters to decide euro future

ATHENS (Reuters) - Greeks voted on Sunday in an election that could decide whether their heavily indebted country stays in the euro zone or is forced towards the exit, potentially unleashing shocks that could break up Europe's single currency.

Opinion polls are banned in the final two weeks of the campaign but party officials' own estimates on election day showed the radical leftist SYRIZA bloc, which wants to scrap the punishing austerity package demanded by international lenders, neck and neck with the conservative New Democracy party, which broadly supports it.

The European Union and International Monetary Fund have said a new government must accept the conditions of a 130-billion-euro ($164-billion) Greek bailout agreed in March or funds will be cut off, driving Athens into bankruptcy.

All the main parties say they will keep Greece in the single currency, but SYRIZA leader Alexis Tsipras believes he can renegotiate the deal. He is betting that European leaders cannot afford the financial market turmoil that would be unleashed by cutting a member of the euro zone loose.

Tsipras, a 37-year old former communist student radical, has shot from obscurity to global celebrity in a matter of weeks. He appeared buoyant and confident as he cast his vote in hot summer weather at an Athens polling station.

"We are optimistic. The future belongs to the bearers of hope. We will win," he told a jostling media scrum.

On the right, establishment heir and New Democracy leader Antonis Samaras says rejection of the EU/IMF bailout would mean a return to the drachma and even greater calamity, although he, too, wants to ease some aspects of the package.

Samaras, smiling but accompanied by nothing like the media attention enjoyed by Tsipras, told reporters in the Peloponnesian town of Pylos where he cast his ballot: "Tomorrow will bring a new beginning for Greece."

Opinion polls show Greeks, weary and disillusioned after five years of deep recession, overwhelmingly favor remaining in the euro, but there is bitter anger over repeated rounds of tax hikes, slashed spending and sharp cuts in wages and pensions.

Many voters are also furious with New Democracy and the other traditional ruling party, PASOK, blaming them for decades of corruption and waste which have left them with a ruined economy and one of the heaviest debt burdens in the world.

"I voted for the bailout because these are the terms that will keep us in Europe," said 66-year-old English teacher Koula Louizopoulou after casting her ballot in Athens, hinting that she had chosen New Democracy.

"It's the first time I feel depressed after voting, knowing that I voted again for those who created the problem, but we don't have another choice," she added.

An unexpected 1-0 victory over Russia by the Greek national soccer team at the Euro 2012 championships on Saturday provided a boost to voters' spirits but the streets in Athens were generally quiet as the last hours of voting began.

There was little sign of enthusiasm at the polling stations.

"I used to vote for the main parties but not anymore. I'm done with them, since they got us here. It's time for things in Greece to change," said 31 year-old mechanic Vassilis Yanellis.

Police went to a television station in Athens where two grenades were thrown but they did not explode and officers said they did not believe the incident was related to the vote.

MOVE ON

A previous election on May 6 created weeks of uncertainty when no party was able to form a government and markets will now watch anxiously for the first signs of a result, with exit polls due shortly after voting ends at 7 p.m. (1600 GMT).

First official results are due around 9.30 p.m. local time (1830 GMT).

The party gaining the most votes gets an automatic 50-seat bonus added to their tally but neither New Democracy or SYRIZA is expected to win more than about 30 percent of the vote. So whichever emerges as the top party will have to negotiate a coalition with smaller groups.

The Socialist PASOK party, virtually wiped out in the inconclusive May election, would join its old rivals New Democracy in a pro-bailout unity government, an option SYRIZA has repeatedly ruled out.

Five opinion polls published before the ban took effect two weeks ago put New Democracy narrowly ahead. Two other polls had SYRIZA leading and pollsters said the race was too close to call.

But whoever wins power may find it is short-lived and, despite the insistence of EU politicians, some adjustment of the bailout terms may be inevitable if Greece is to get on top of a public debt amounting to 165 percent of gross domestic product.

"It is a scenario I see as likely and if that is the condition presented for Greece to stay and then move on, I would say it is probably something that should be attempted," Angel Gurria, head of the Organization for Economic Cooperation and Development, told Reuters in an interview.

Central banks from Tokyo to London are readying arsenals to defend banks and national currencies against any post-election turmoil. The result will dominate a meeting of the Group of 20 world economic powers on Monday and Tuesday in Mexico.

Finance officials in the euro zone have discussed limiting the size of withdrawals from cash dispensers, imposing border checks and introducing euro zone capital controls as a worst-case scenario.

Euro zone officials have hinted they might give a new Greek government some leeway on how it reaches debt targets set by the EU/IMF bailout package, but would not change the targets themselves.

Euro zone paymaster Germany warned Greeks on Saturday the bailout would not be renegotiated.

"That's why it's so important that the Greek elections preferably lead to a result in which those that will form a future government say: 'Yes, we will stick to the agreements'," Chancellor Angela Merkel told a party conference.

A Greek exit from the single currency would heap further pressure on two far larger European economies - Spain has already received up to 100 billion euros to save its struggling banks and Italy has also slipped closer to crisis.

TEST

Even if New Democracy emerges victorious, it is likely to face a strong protest movement led by the newly empowered SYRIZA, and any new government will take the reins of a country on the verge of bankruptcy.

Five years of recession and more than two years of acute crisis have started to fray the edges of Greek society, undergoing its severest test since the overthrow of the military dictatorship in 1974.

The streets of central Athens are scarred by repeated waves of protests, some hospitals are short of vital medicines and reports of suicides caused by the crisis have become routine.

The far-right Golden Dawn party won seats in the first election, illustrating the fragmentation of a stressed society wrestling with unemployment of almost 23 percent and plummeting living standards.

Some global businesses and banks are in retreat.

Europe's biggest retailer Carrefour said on Friday it was selling up in Greece, a day after French bank Credit Agricole moved to take direct control of its Albanian, Bulgarian and Romanian units from its Greek bank Emporiki.

($1 = 0.7939 euros)

(Additional reporting by Renee Maltezou Writing by Matt Robinson and James Mackenzie)

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