Election deadlock pushes Greece closer to euro exit

Daniel Howden

Greece has failed in its efforts to forge a "pro-European" government.

The stalemate comes after a watershed election in which nearly two-thirds of voters rejected the reform programme which has underwritten the country's bailout.

The prospect of a deadlock in Athens, fresh elections next month and a possible exit from the euro sent markets plunging, while Angela Merkel, the German Chancellor, warned that Europe's most embattled economy must stick to its commitments to international lenders or face default.

Greece's two main parties were locked in talks over a government of national unity but a collapse in their support left them with only one-third of the vote, no parliamentary majority and no obvious coalition partner.

Antonis Samaras, leader of first-placed party New Democracy, announced in a televised address last night that he had done "everything possible" but had failed to build a coalition, handing the mandate back to the president.

"We directed our proposal to all the parties that could have participated," he said, "but they either directly rejected their participation, or they set as a condition the participation of others who, however, did not accept."

While new forces like the radical left Syriza party, who came second on Sunday, celebrated the overthrow of the two-party system, analysts warned that Greece may be left without a government and forced to return to the polls next month. Should the country fail to secure its next tranche of loans in June then it would be forced into bankruptcy and out of the euro, a prospect that rattled global stock markets.

The turmoil in Greece coupled with jitters over the election in France on Sunday that brought the Socialist Francois Hollande to power initially pushed shares down to the lowest levels for more than four months.

The Greek market plunged 8pc in early trading as investors bet that it was back on the brink of default and departure from the eurozone.