Greece: New elections to be held on June 17

Panagiotis Pikrammenos Council of State chief will head a caretaker government until a new government is formed after elections on June 17th. Numerous attempts to form a coalition government failed. The resulting uncertainty is roiling markets and caused a run on Greek banks. Many Greeks fear that Greece will return to the Drachma the former Greek currency. The caretaker government will not have the power to make any binding commitments.

About 898 million dollars have been withdrawn from Greek banks. A spokesperson said that as yet there is no panic but there is great fear. Theodore Krintas manager director of a wealth management company said:"I would expect the population to quietly be doing what it has been doing in the last days. In other words, some of the Greek citizens are afraid and are taking a portion of the money, but I'm not expecting a bank run,"

The election on May 6th was a disaster for the two leading pro austerity parties especially the socialist PASOK party. Greeks voted for parties that reject the austerity package imposed upon them by the EU's Troika..

The spending cuts and tax hikes have left the country mired in the fifth year of a deep recession and sent unemployment soaring to above 21 per cent, and many argue the country cannot hope for recovery if they stick to the deal. The Greeks are fed up with austerity measures that have brought a recession lasting five years now and an unemployment rate over 21 per cent. It is much higher among youth.

The Sytriza party ,an anti-austerity grouping, according to polls will increase its vote and come in first in the upcoming election. However, no doubt there will be a great deal of pressure upon the Greeks to vote for the austerity measures both from within and without the country. The prospect of Greece leaving the Euro zone is becoming a real possibility recognized even by the IMF. The IMF head Christine Lagarde said:"If the country's budgetary commitments are not honoured, there needs to be appropriate revisions, which means either supplementary financing and additional time, or mechanisms for an exit, which in this case must be orderly,""

The head of Syriza Alexis Tsipras that came second in the May 6 elections requested "that the caretaker government should not implement measures that would involve further cuts in salaries, pensions and public spending, that would dismantle labour relations or allow privatizations. . I also asked for a freeze on every ongoing process regarding the sale of state property."

Even if Tsipras does not win enough seats to govern alone after the next election his party will receive 50 extra seats for coming in first place and he should easily be able to form a majority with another anti-austerity party on the left. However so far the Greek communist party has rejected the idea of joining a coalition. The next government will in all likelihood reject the austerity agreement reached with the Troika.

Robert O'Daly of the Economist said:"This will make reaching an agreement between the next government and Greece's international creditors extremely difficult, raising the risk of a Greek exit from the euro and sovereign debt default," "The consequences of this would be dire for Greece and probably the rest of the euro area." For more see this article.