Greece's political impasse since the inconclusive May 6 election has raised the possibility another vote will have to be held as early as next month, with polls showing that could boost anti-bailout Syriza to the top spot. The standoff has reignited concern the country will renege on pledges to cut spending as required by the terms of its two bailouts negotiated since May 2010, and, ultimately, leave the euro area.

Pasok, New Democracy and Democratic Left agreed last week on a government that would last until 2014 and be committed to keeping the country in the euro region and renegotiating bailout conditions from the International Monetary Fund and European Union to boost growth. Syriza's Tsipras turned down the approach on May 11 as the first opinion polls since the elections showed he was gaining support.

Democratic Left has said that Syriza, the second-biggest party, must be part of its proposed unity government, or give it tacit support at least, if the government is to succeed. The position has been adopted by Pasok and New Democracy.

Proposal 'Failed'

“The president told me that we have no agreement on this proposal of ours as yet,” Fotis Kouvelis, the head of the Democratic Left party, said after meeting with Papoulias. “I regret that this proposal has failed.”

The ASE Index dropped 3.7 percent to 589.42 at 12:10 p.m. in Athens, its lowest level since November 1992. The benchmark measure fell 11 percent last week. National Bank of Greece SA fell 4.7 percent as Greek banks led declines. Opap SA, Europe's largest listed gambling company, plunged 14 percent to 5.05 euros ($6.50), its biggest drop in over seven months.

The euro dipped 0.3 percent to 1.2872 as of 10:09 a.m. in London, its lowest level in four months, before euro-area finance ministers convene in Brussels today.

Tsipras won't attend “selective meetings” called by the president, the party said today. He may attend a meeting of all parties, excluding ultra-nationalist Golden Dawn, or talk privately with the president, it said.

Yesterday, Tsipras challenged the three pro-bailout parties to go ahead with forming a government, saying they would lack legitimacy.

“The three parties that have agreed on the policy framework for a two-year government to implement the memorandum have 168 lawmakers in the new parliament,” which has 300 deputies, he said. “They have the majority so let them proceed. Their demand for Syriza to join their planned agreement is illogical.”

Syriza would come in first, though short of an outright majority, with 20.5 percent of the vote, if elections were held again, according to a Kapa Research poll for the newspaper To Vima, released May 12. It got 16.8 percent in the May 6 election. Support for New Democracy would fall to 18.1 percent from 18.9 percent and Pasok would drop to 12.2 percent from 13.2 percent, according to the survey.

“It's not about arithmetic,” Evangelos Venizelos, the socialist Pasok leader said after yesterday's meeting. “If someone wants to drag the country to elections again to find ourselves in the same process and possibly the same dead end, with slightly different and better terms for some, then they must assume that responsibility.”

The Kapa poll showed 78 percent of Greeks want the government to do whatever possible to keep Greece in the euro area and that 72 percent want political parties to make concessions to form a coalition, compared with 22.9 percent who want new elections. Kapa surveyed 1,007 Greeks May 9 and 10. The poll had a margin of error of 3.1 percentage points.

Two Seats Shy

The May 6 election resulted in New Democracy and Pasok, the two parties that supported the international rescue in an interim government this year, being two deputies short of the 151 seats needed for a majority in Parliament.

Tsipras failed to reach an accord with other leaders after giving them an ultimatum to renounce support for the EU-led rescue in order to enter the government. Both Antonis Samaras, the leader of New Democracy, and Venizelos, rejected the request.

Samaras, whose party finished first, gave up trying to forge a coalition after six hours of talks on May 7.

A Greek departure from the euro could be “technically” managed yet would damage confidence in the monetary union, European Central Bank Governing Council member Patrick Honohan said May 12.

“It is not necessarily fatal, but it is not attractive,” Honohan told a conference in the Estonian capital, Tallinn.

Greece will run out of cash by early July if partners decide to withhold their next aid payment. The European Financial Stability Facility on May 9 confirmed that a 5.2 billion-euro tranche will be released by the end of June, with 4.2 billion euros already disbursed May 10. The remaining 1 billion euros will be released depending on Greece's financing needs.

Leaders said they were given a note on the state of the economy by interim Prime Minister Lucas Papademos yesterday. Some Greek political leaders, such as Independent Greeks head Panos Kammenos, said they would refuse to read it unless it is published.

Ta Nea reported that the letter underlined the state will find it difficult to cover payments in June due to the political impasse and the holding back of the 1 billion euros. The newspaper didn't say how it got the information.

Under the terms of the bailout, a new government will need to spell out how it will save 11 billion euros next month.

“While last week's election was largely about budget cuts, the next one will be entirely about the euro,” Erik Nielsen, chief economist at Unicredit Bank AG, said in a note. “But I don't know what share of the 70 percent of Greeks in favor of the euro will fully appreciate the connection between reforms and using the euro.”

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