Greece Faces Early Election Sparking Concern for Economic Recovery

Greek elections
Greek lawmakers leave the hall after the second of three rounds of a presidential vote at the Greek parliament in Athens December 23, 2014. Alkis Konstantinidis/REUTERS

Greek lawmakers failed to elect a new president in a final round of voting on Monday, leaving the country facing an early election that could derail the international bailout program it needs to keep paying its bills.

The only candidate in the race, former European Commissioner Stavros Dimas, matched the result achieved in the second round of voting before Christmas but fell short of the 180 votes needed to become president.

Under Greek law, a parliamentary election must now be called, leaving financial markets and Greece's European Union partners facing weeks of uncertainty that could undermine fragile signs of economic recovery and derail its public finances. A general election is now expected to be held by early February.

The radical leftist Syriza party, which wants to tear up Greece's bailout agreement with the EU and International Monetary Fund and wipe off a big part of its debt, has held a steady lead in opinion polls for months, although its advantage has narrowed in recent weeks.

Divisions among potential post-election coalition partners for both Syriza and Samaras' conservative New Democracy party have also complicated the outlook, increasing the risk that any new government would be short-lived.

Underlining the potential volatility facing markets, the main Athens stock market index accelerated losses to fall 10.7 percent after the vote, while Greek bond yields jumped above 9 percent.

Prime Minister Antonis Samaras urged lawmakers at the weekend to elect Dimas to succeed the 85-year-old head of state Karolos Papoulias and allow the final round of bailout negotiations to be completed.

But having offered a deal to bring forward elections scheduled for mid 2016 to the end of next year, he ruled out new concessions and said he was confident of winning any election.

Samaras, who had been pushing for an early end to the deeply unpopular bailout program, brought forward the presidential vote earlier this month in a bid to end gathering political uncertainty hanging over his ruling coalition.

A negotiating team from the "troika" of creditors from the EU, IMF and European Central Bank, had been due to resume talks in Athens next month to wind up the 240 billion euro ($290 billion) bailout and agree an interim, post-bailout program.

In a bid to reassure international partners, Syriza leader Alexis Tsipras has sounded a more moderate tone recently, promising to keep Greece in the euro and negotiate an end to the bailout agreement rather than scrap it unilaterally.

But he has stuck to his promise to reverse many of the tough austerity measures imposed during the crisis, reversing cuts to the minimum wage, freezing state layoffs and halting the sale of state assets.