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25th Feb 2024

Greece urged to uphold austerity as coalition talks begin

  • Merkel. Greece must approve €11.5bn of cuts before the end of June despite its political mess (Photo: consilium.europa.eu)

EU leaders have made it clear that Greece has to stick to pre-agreed spending cuts even after around two thirds of the population voted for anti-austerity parties in Sunday's (6 May) election.

With Greece still digesting the results of a vote which brought seven parties into parliament, ranging from the Communists to the far-right Golden Dawn, both Brussels and Berlin have underlined that the terms of the bail-outs are not up for negotiation.

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Angela Merkel of Germany, which put the most money towards the two Greek rescues, said it was of the "utmost importance" that Athens sticks to the reform programme - a programme which has already seen welfare and incomes slashed and which has been widely blamed for a sharp drop in GDP and a sharp increase in unemployment.

The European Commission had the same message.

Amadeu Altafaj Tardio, a spokesperson for economic affairs commissioner Olli Rehn, reminded Greeks that "solidarity is a two-way street." He added: "We think Greece must remain a member of the euro but everybody has to carry his responsibilities here."

It is likely to be some time before Greece's political future becomes clear, in developments with profound implications for its continued membership of the euro.

Antonis Samaras, leader of the centre-right New Democracy, which received the largest share of votes on 19 percent, has been tasked with forming a government. He has three days to succeed.

If he fails, Alexis Tsipras, leader of radical left Syriza (16.77%), will attempt to do the same. The coalition-forming baton will eventually go to Evangelos Venizelos of the centre-left Pasok (13.9%) if he also fails.

If there is no outcome from the coalition-forming attempts, the president will get all seven party leaders together to try and form a coalition. A failure at this stage would mean a caretaker government to take the country into fresh elections.

Over and beyond the domestic timetable is the bail-out timetable. The Greek parliament has to approve a further €11.5 billion in cuts by end of June in order to comply with the strings-attached to EU-International-Monetary-Fund money.

With all the parties scoring relatively poorly in the elections - for the establishment pro-austerity New Democracy and Pasok parties it was, in comparison to previous votes, an electoral wipe-out - the government-forming task has become even more difficult.

In addition to overcoming reform programme differences, some of the parties are likely to be considered beyond the pale when it comes to government-forming, such as the neo-facist Golden Dawn.

In a further complication, Merkel herself - the person who has the most say over EU policies and the chief architect of the pro-austerity model - is in a tight spot.

Germany's most populous state - North Rhine Westphalia - goes to the polls on 13 May, one week after the ruling coalition suffered a set-back in the small state of Schleswig-Holstein.

The pending vote leaves Merkel with little room for manoeuvre in the coming days when it comes to questions of Greece's reform programme.

The same applies to concessions on adjusting the EU's recent fiscal compact treaty, one of the main demands of France's newly-elected Socialist president Francois Hollande.

Speaking on Monday, Merkel said the pact "was not up for debate."

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