But European leaders showed little inclination to back down from their austerity demands, setting the stage for a clash over Greece’s future that could quickly spread beyond the country’s borders.
Other vulnerable nations such as Spain and Italy could be affected by a renewed sense that euro-zone membership isn’t necessarily permanent. And the United States’ fragile economic recovery also could face head winds coming over the Atlantic, even as new voices such as French President-elect Francois Hollande give fresh strength to arguments that Europe should focus more on growth and less on austerity.
A confrontation between Greece and its European lenders could come as soon as next month. Greece had agreed to implement many tough austerity measures, such as cutting health-care spending by June 30, and to find an additional $19 billion in savings for next year. The already difficult prospect of meeting that deadline now appears impossible as the country struggles to find new political leadership after the divisive weekend vote that punished two long-dominant parties and bolstered those on the far left and far right.
With the pro-business New Democracy party failing to form a coalition Monday, the second- and third-place parties will each be given a chance to form a coalition. If they do not succeed, Greece’s president will try to broker one. Most politicians and political analysts here expect those efforts to fail, forcing new elections in June and allowing little work on the country’s pressing economic problems.
Meanwhile, Greece’s coffers continue to empty, and with failure to act on required austerity measures likely to block a scheduled $39 billion bailout installment in June, the country will probably be bankrupt soon after. If Greece runs out of euros, it would be forced to start printing drachmas, which economists say would quickly devalue against the stronger common currency.
Europe’s top leaders gave no indication Monday that they would allow Greece any wiggle room, and one, Austrian Chancellor Werner Faymann, warned of the possibility of Greece exiting the euro zone.
In Germany, where taxpayers bear the biggest burden of paying for the bailout, Chancellor Angela Merkel said Monday that she would hold Greece to its previous agreements.
“Obviously, it is of utmost importance that the programs we have agreed on with Greece are continued,” she told reporters in Berlin. “The process is a difficult one, but despite that, it should go on.”