Greek election looms as parties struggle to form government

Greece's main opposition party tried to form a new government Friday in the wake of Prime Minister Alexis Tsipras' resignation, but is not expected to succeed — paving the way for another potentially destabilizing election.

Tsipras resigned late Thursday and called an early election next month to deal with a rebellion in his radical left Syriza party over the terms of Greece's new bailout deal.

The opposition has few chances of uniting and forming a government, meaning that after more than five years of a worsening financial crisis, Greece is headed for its fifth national election in six years. Tsipras is widely tipped to win the vote, though if he fails to secure an outright majority he could have to seek a new coalition.

His decision to call a vote so early — just hours after Greece started tapping loans from its 86 billion euro ($95 billion) rescue program — amounts to a bet that he can regain power with a new government that would not be hobbled by internal dissent.

The rebels announced Friday they were splitting to form their own anti-austerity movement.

They want to scrap the bailout altogether, arguing that the budget savings and reforms Tsipras agreed to for the bailout are exactly what they had vowed to fight when they came to power with Syriza in January.

About one in four Syriza lawmakers refused to back the bailout's ratification in parliament last week, which was only approved with backing from opposition parties. Faced with such dissent, it became only a matter of time before Tsipras called an election or confidence vote to confirm his mandate to implement the bailout reforms.

Outgoing government officials say the likeliest date for the election is Sept. 20. It will be the third time this year that Greeks vote, after January elections and a July 5 referendum on reforms that creditors were proposing during bailout negotiations.

Some analysts voiced concern that the election could delay reforms needed to get rescue loans, which are only disbursed after quarterly reviews.

"A September election would occur before the first program review in October and may well hamper and delay the technical work and political decisions necessary for its completion," said the Fitch ratings agency.

"The likely pause in legislating for reforms during the election campaign coming so soon after the agreement was concluded may rekindle or reinforce some creditors' concerns about Greece's ability to meet the program's requirements," Fitch said.

So far, Greece's European creditors seemed sanguine about the election, which had been widely expected.

"The step by Prime Minister Tsipras isn't surprising" considering he has lost his majority in parliament, said Steffen Seibert, spokesman for German Chancellor Angela Merkel. He noted that the bailout deal was signed with Greece, and not just the current government, meaning it should be implemented by whoever emerges victorious from the election.

Jeroen Dijsselbloem, the Dutchman who heads eurozone finance ministers meetings, said he hoped the elections would not slow down Greece's reforms. "There is a very broad majority in the Greek parliament at the moment that supports the (bailout) package and the expectation is that that could even get stronger," he told reporters.

In Brussels, European Commission spokeswoman Annika Breidthardt said the EU executive body was confident the bailout program would be adhered to.

The political uncertainty nevertheless took its toll on Greece's stock market, with the main stock index closing down 2.5 percent, a day after losing 3.5 percent on election speculation.

On Friday, President Prokopis Pavlopoulos met conservative New Democracy party head Evangelos Meimarakis and asked him to try to form a government.

Meimarakis later met with the head of the small centrist Potami party, Stavros Theodorakis, who said the best way forward for Greece was to hold elections as soon as possible.

"The way things are now ... we believe it is impossible for this parliament to produce a government," Theodorakis said after the meeting.

Meimarakis has three days to seek coalition partners, after which the mandate would be given to the third largest party in Parliament for a further three days.

The third largest party is now the new movement formed by the 25 lawmakers who split from Syriza Friday. The group, named Popular Unity, will be led by former energy minister Panagiotis Lafazanis.

If, as expected, neither attempt bears fruit, parliament will be dissolved and a caretaker government appointed to lead the country to early elections within a month.