Greece rebels form new party ahead of snap polls

Rebels from Greece's Syriza party on Friday formed a breakaway parliamentary group after Prime Minister Alexis Tsipras resigned, paving the way for the crisis-hit country's fourth election in three years.

The fresh political uncertainty shook the markets, with stocks in Athens shedding 2.5 percent, while Greece's European creditors urged it to implement the terms of the massive new bailout whoever wins the poll likely to be held on September 20.

Tspiras announced his resignation late Thursday, going on the offensive to defend the tough terms he accepted in the 86-billion-euro ($96 billion) rescue package which had triggered a rebellion in his hard-left Syriza party.

The European Union said Tsipras's decision was "not a surprise" and that it remained confident the reforms promised by Athens as part of the deal agreed last month after weeks of difficult negotiations would be carried out.

Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers, also urged Greece to hold the election "swiftly, to lose as little time as possible".

"A large majority backed the measures in the Greek parliament and we are waiting for this support to be even bigger (after the election), but let's wait to see what happens," said Dijsselbloem, also the Dutch finance minister.

- Empty mandate -

Greece's conservative New Democracy party -- the second largest party in parliament with 76 of 300 seats -- undertaking a futile search for allies to create a government before new elections are formally called.

According to the constitution, following the resignation of the premier, the president must give a three-day exploratory mandate to each of the three largest parties in parliament to see if they are able to form a coalition government.

If they fail, the president then names a caretaker administration, usually under a senior judge, to hold early elections.

The Syriza rebels, now calling themselves the Popular Unity group after the alliance that brought Chile's Salvador Allende to power in 1970, were also to receive an essentially empty mandate.

At least 25 rebels out of a total of 149 Syriza MPs will join the new party, making it the third largest grouping in the outgoing parliament.

"A new power is coming to the fore. We aim for government... we want to become a great movement that will sweep the bailouts aside," the faction's leader Panagiotis Lafazanis, formerly the top eurosceptic in Syriza, told reporters.

Syriza was deeply divided over Athens' acceptance of the bailout package finally agreed with international creditors last month, the third for Greece in five years.

Syriza rebels had mutinied in three separate parliamentary votes tied to the bailout, effectively leaving Tsipras at the head of a minority coalition government.

- 'Submit to your judgement' -

The 41-year-old premier who came to power in January said he had worked hard to secure the best possible rescue deal for his country, but now needed a clear new mandate from the Greek people after it cost him his parliamentary majority.

"Now that this difficult cycle has come to an end, I wish to submit to your judgement all that we have done," Tsipras said in a televised address to the nation.

The vote would be the second in just eight months and the fourth since 2012.

Tsipras' resignation came on the same day the debt-crippled nation received its first tranche of bailout funds, effectively starting the rescue package, the third in five years.

The hard-won package -- which kept Greece in the eurozone but comes with demands for painful spending cuts and tax hikes -- proved fatal for Syriza, with those on the eurosceptic left accusing him of betrayal.

- Implacable foe -

It was not immediately clear how much support the new Popular Unity group could steal from Tsipras, who is hoping the snap polls will return him to power in a new position of strength.

Berlin said it expects Athens to implement the reforms agreed under the bailout deal and that Tsipras's resignation has not changed anything.

"The programme was agreed with the Greek government, and that runs on for three years. That has not changed," Steffen Seibert, spokesman for Chancellor Angela Merkel, told reporters.

Lafazanis, who was removed from his post during a cabinet reshuffle last month, is an implacable foe of the bailout agreement and has accused Tsipras of betraying the anti-austerity values that brought him to power.

Before the emergence of the new party, the third largest grouping in parliament was the ultra-nationalist Golden Dawn, which holds 17 seats.