Europe

Q&A: Political crisis in Greece

Greece faces its second elections in just over a month after parties failed to form a government in the face of swingeing austerity cuts.

Continuing uncertainty over Greece's willingness to meet its commitments under a huge international loan package has again raised the possibility of the country leaving the eurozone.

Political analysts say new elections could strengthen the hand of those who reject the cuts.

What would new elections achieve that those on 6 May did not?

Opinion polls suggest Syriza, a leftist coalition, would move from second to first place, winning a strong mandate to form the next government. The party won 16.8% in the earlier polls, while the conservative New Democracy (ND) polled 18.9% of the vote. Under Greece's political system, the biggest party automatically gains an extra 50 seats in the 300-seat parliament.

What would a Syriza-led government mean for the eurozone?

Syriza says it does not want to leave the euro but cannot support the current bailout conditions. Its leader, Alexis Tsipras, has shocked eurozone leaders with his assertion that Greece can simultaneously renege on the terms of its bailout and stay in the eurozone. "I think that is an impossible equation and I think in that sense it is an irresponsible statement," Finnish Minister for European Affairs Alexander Stubb said in response.

Is there an alternative scenario?

Nick Malkoutzis, deputy editor of Greece's daily English-language newspaper Kathimerini, believes at least some voters now regret how they voted on 6 May, when they punished ND and its coalition partner, the socialist party Pasok. If the Independent Greeks, a party led by ND defector Panos Kammenos, were to become discredited, votes could drift back to ND.

Are we really looking at a return to the drachma?

Greece could go bankrupt as early as June if Eurozone leaders withhold further financial aid. Analysts say this would almost certainly herald a Greek return to its national currency.

What about the argument that Greece's exit would destabilise the eurozone?

German Finance Minister Wolfgang Schaeuble, one of the most important figures in the eurozone, has dismissed such talk. "Europe won't sink that easily," he said. "We want Greece to remain in the eurozone but it also has to want this and to fulfil its obligations." Irish central bank governor Patrick Honohan has said a Greek departure from the eurozone "isn't necessarily fatal" and could technically be managed.

But the damage would be significant all the same?

Jonathan Loynes, chief European economist at Capital Economics, has told Reuters there is "now a considerable danger that Greece simply runs out of money" in June, that "it can't pay wages, can't run public transport, can't maintain infrastructure and that the country just descends into complete chaos". Greece's partners would stand to lose billions of euros, with France and Germany particularly exposed.

What happens next?

New elections are expected to be held on 10 or 17 June.