Germans insist eurozone is safe as Greek talks fail again

The prospect of fresh elections in Greece – coupled with further uncertainty for Europe – came a step closer after the latest attempts to form a coaliton ended in failure.

Evangelos Venizelos, leader of socialist party Pasok, held a series of discussions with the heads of others parties yesterday.

There had been some hope of a coalition between Pasok, their outgoing coalition partners New Democracy and the small Democratic Left.

But Mr Venizelos confirmed last night that no deal was possible and that he would hand the mandate to form a government back to president Karalos Papoulias today.

The president is likely to summon party leaders over the weekend in an attempt to form a national government. If those talks fail, fresh elections will be called next week. The political instability has alarmed Greece’s European creditors, who have warned that the country’s international bailout loans and its use of the euro could be threatened.

Mr Schaeuble said Europe had been adjusting so that it could deal with a Greek exit.

“We have learned a lot in the last two years and built in protective mechanisms,” he said.

“The risk of effects on other countries in the eurozone have been reduced and the eurozone as a whole has become more resistant.”

Greeks punished both main parties in last Sunday’s elections for their handling of the country’s protracted financial crisis and the deep austerity measures. Voters instead chose many smaller parties on both the right and left, leaving a hung parliament with no group able to form a government.

Chances of a deal seemed to hinge on the position of Alexis Tsipras. His Syriza party made massive gains in the election, winning 16.8 per cent and 52 seats in the 300-member parliament.

Foutis Kouvelis, whose Democratic Left’s 19 seats put it in a kingmaker position, insisted Syriza must be part of any governing coalition.

“It is clear that from the first moment, Syriza wanted elections,” he told his deputies yesterday. “And without Syriza, a government cannot be formed that is in harmony with the popular will.”

Mr Tsipras could benefit from a repeat election, with an opinion poll published on Thursday showing his party would likely come first in a new ballot, although with not enough votes to form a government itself.

Both New Democracy head Antonis Samaras and Mr Venizelos, who spent nine months handling the Greek crisis as finance minister, have warned that Mr Tsipras’ demands for Athens to pull out of its bailout commitments would be disastrous and lead Greece out of the euro.

The vast majority of Greeks, and the leaders of the main parties, all want Greece to remain in the euro.

The EU’s monetary affairs chief, Olli Rehn, also stressed that Greece’s bailout terms were the only way the country could reform its economy.

“Greece systemically lived beyond its means for a decade. It is simply not sustainable and therefore Greece has had to take firm action to restore its economic competitiveness and sustainable public finances,” he said in Brussels.