Greek Leftist Holds Coalition Talks, Effort Seen Doomed

Radical leftist Alexis Tsipras meets the leaders of Greece's mainstream parties on Wednesday, with little chance of clinching a deal on a coalition government after he set tearing up an EU/IMF bailout deal as a condition.

A new election seems increasingly likely within weeks after two days of failed efforts to reach an agreement among parties deeply divided over whether to stick to a program that saved Greece from bankruptcy but caused steep economic hardship.

Tsipras, who has been tasked with trying to form a government after his party came second in Sunday's election, will press his anti-bailout agenda by sending a letter to EU leaders saying that the rescue deal was no longer binding given the way Greeks had voted, two aides said.

Voters enraged by their country's plight rejected the two parties which led Greece for decades - conservative New Democracy and Socialist PASOK. The two parties sent letters to the EU and IMF ahead of the election committing to stick to the reforms required in return for aid.

"He will say that the signatures of (conservative leader Antonis) Samaras and (socialist leader Evangelos) Venizelos committing to the program represent only 32 percent of voters and are not binding the Greek people to the program anymore," Nikos Papas, head of Tsipras' political office, told Reuters.

Tsipras, 37, will send the letter to European Central Bank chief Mario Draghi, European Commission head Jose Manuel Barroso and EU Council President Herman von Rompuy, Papas said.

The remote chance of Tsipras forming a coalition faded even further on Tuesday when Samaras promptly rejected his demand to scrap the bailout, warning such a move could drive the debt-choked country out of the euro.

"Mr. Tsipras asked me to put my signature to the destruction of Greece. I will not do this," Samaras said. "The country cannot afford to play with fire."

Tsipras will meet Venizelos at 11:00 a.m. EDT (1500 GMT) and Samaras at 1600 GMT.

If, as increasingly seems likely, no politician is able to cobble together a majority in the 300-seat parliament, a new election would have to be held in 3-4 weeks. Tsipras, the youngest Greek party leader, will be hoping for a stronger mandate in a new vote.

"After Samaras's response to Tsipras today, that particular bridge has been exploded, burned," said Theodore Couloumbis, political analyst for Athens-based think-tank ELIAMEP.

Rivals for decades, New Democracy and PASOK had been ruling jointly in an uneasy coalition that negotiated last year's bailout, which saw lenders demand ever-deeper spending cuts in a country already suffering its fifth year of recession.

Most Greeks say they want to keep the euro currency - widely seen as impossible without the bailout - but they are furious with the two mainstream political parties they blame for the recession, record high unemployment and endemic corruption.

Most believe cuts demanded by the EU and International Monetary Fund are only making the situation worse by increasing unemployment and preventing economic recovery.

The euro, world shares, precious metals and oil all fell on Wednesday as Greece's political deadlock further unsettled jittery investors worried that the country will again destabilize the euro zone, as it first did in 2009 when it triggered the bloc's debt crisis.

EURO WARNING

On the streets of Athens, voters voiced exasperation over the lack of a deal between parties.

"They are all saying they don't want to cooperate with anyone else. What does this show? All they care about is being prime minister, nobody cares about the country," said Vasilia Konidary, who voted for Drasi, a tiny liberal party.

Theoretically, it could still be possible for Tsipras to form a left-leaning coalition with PASOK, if New Democracy abstained in a confidence vote rather than opposing it.

Such a scenario seems highly unlikely, but PASOK leader Venizelos left the door slightly open on Tuesday by renewing calls for all the country's pro-European parties to form a coalition and avoid a second round of elections.

"The Greek people asked for two things: For Greece to stay safely in Europe and the euro and at the same time to seek the best possible change in (bailout) terms so that citizens and growth can be helped," Venizelos said.

If Tsipras fails, the president will give Venizelos, whose party was the biggest loser in the election, the last chance to try to form a government. If he should fail, new elections loom.

EU, IMF and ECB chief inspectors, collectively known as the "troika", will wait for a new government to be in place before coming for an inspection visit and making any decision on releasing more aid.

Greek finance ministry officials have warned the country might run out of cash by end-June if it does not have a government in place to negotiate a next aid tranche.

A key condition for more aid - and one hard to attain after anti-bailout parties obtained 151 seats out of 300 in parliament - is to agree to over 11 billion euro in extra spending cuts for 2013-2014 by June.

ELIAMEP's Couloumbis said many Greeks may still be hoping Europe will bail them out and keep them in the euro zone, even if they reject the austerity demanded by the EU and IMF.

"Many here think Europe cannot afford to let Greece go down that path - that all we have to do is tell them we'll jump from the 10th floor and they will have a safety net for us," he said. "I say: 'Beware, you may hit the ground and break into many pieces.'"