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Snap poll in Greece after failure to choose president
[ATHENS] Greek Prime Minister Antonis Samaras on Monday called for a snap poll next month that could bring a radical anti-austerity party to power after parliament failed for a third time to elect a president.
The election expected on January 25 is likely to further rattle global financial markets after Greece's dire finances nearly destroyed the eurozone in 2012.
As stocks in Athens tumbled and analysts saw the makings of a new Greek crisis, Samaras insisted voters would choose to stay the course of fiscal reform.
"I very strongly believe that the pro-European forces and those forces who have been for the necessary structural changes in this country, will prevail. I am very optimistic on this," he told reporters.
Greek stocks closed down almost four per cent - having lost a massive 11 per cent earlier - amid fears that the front-running far-left Syriza party could roll back tough austerity measures if it wins the election.
But Europe's main stock exchanges closed higher. London's benchmark FTSE 100 index was up 0.36 per cent at 6,633.51 points while in Paris the CAC 40 rose 0.51 per cent to 4,317.93 points.
Syriza had dismissed warnings that its electoral programme could spook the markets, but within hours of the election call, the International Monetary Fund said it was suspending further bailout payments to Greece until a new government is formed.
"Discussions with the Greek authorities on the completion of the sixth review of the programme... will resume once a new government is in place, in consultation with the European Commission and the European Central Bank," said IMF spokesman Gerry Rice.
The rate on 10-year Greek bonds jumped to 9.55 per cent from 8.5 per cent last week but yields on French and German bonds hit new lows, suggesting the Greek crisis could be contained.
The European Union called on Greeks to stick by the often painful reforms adopted as part of a massive international bailout for the eurozone member state.
"A strong commitment to Europe and broad support among the Greek voters and political leaders for the necessary growth-friendly reform process will be essential for Greece to thrive again within the euro area," EU economic affairs commissioner Pierre Moscovici said.
The new election was triggered after the government candidate to replace President Karolos Papoulias, former EU Environment Commissioner Stavros Dimas, secured just 168 votes out of the 180 needed in the third and final parliamentary ballot.
Under the constitution, parliament must be dissolved in the next 10 days.
Syriza, which declined to vote in the presidential ballot in order to force snap legislative polls, wants to raise salaries and pensions, halt layoffs and freeze the privatisation of state assets - key elements of reforms demanded by Greece's EU-IMF creditors.
"With the will of our people, in a few days, the bailout agreements of austerity will be history," Syriza's 40-year-old leader Alexis Tsipras told reporters.
Samaras said he would ask Papoulias to hold elections on January 25, a ballot which would be Greece's "most decisive in decades".
Analysts at Berenberg bank said there was "a significant risk" Greece may descend into a new deep crisis "with potential euro exit beyond the inevitable bout of near-term uncertainty now".
German Finance Minister Wolfgang Schaeuble said Greeks must not abandon the agreed economic reforms, saying "they have no alternative".
European Commission President Jean-Claude Juncker had recently warned against a "wrong election result" that could see "extreme forces" take power.
The European Union and the IMF have overseen two massive bailouts for Greece after its debt crisis nearly destroyed the 18-member single currency zone.
Opinion polls show Samaras' ruling coalition trailing Syriza but the gap has narrowed, indicating the party would not have a clear majority to form a government on its own if polls were held now.