Greek election set for June 17

Greece will go to the polls for the second time in less than two months on June 17, the Athens News Agency said Wednesday, as fears grew of more instability over the country's eurozone future. State-controlled ANA said Council of State president Panagiotis Pikrammenos, the head of Greece's top administrative court, will be caretaker prime minister and organise the ballot after a May 6 poll failed to produce a government ready to implement in full a tough EU-IMF bailout accord. The country and financial markets had been anxiously awaiting the date of the new polls amid growing fears Greece could be forced out of the eurozone even if most people want to retain the euro for the benefits it brings. The point of contention is the tough austerity measures included in the EU-IMF deal which saw voters desert the main Pasok and New Democracy parties who had supported it in a technocratic government. Fixing an election date at least removes one uncertainty, but a host of problems remain, both for Greece and the wider eurozone. There is no guarantee that the new vote will produce a viable government -- Syriza, the main opponent of the EU-IMF deal, is tipped to win -- which means more uncertainty over Greece's future in the single currency club. News that about 700 million euros (US$894 million) had been withdrawn from Greek banks on Monday stoked the tensions, with investors fearful that a Greek euro exit would be chaotic for everyone. In a statement late Tuesday, Papoulias said the central bank governor had told him that the banks' "situation was very difficult... there was nothing to panic about but that there were a lot of fears that could turn into panic." Christian Schulz of Berenberg Bank said the withdrawals suggested that Greeks were "getting increasingly worried about the country's future in the euro." On their own they "do not indicate panic quite yet. However, this could change soon, so that the central bank would have to step in to save the banks." Press reaction Wednesday was subdued, reflecting the feeling that while most Greeks want to stay in the eurozone, they cannot live with more austerity. The centre-left daily Ethnos wrote that Greece was heading for "elections in a minefield. The result will determine the country's future in the eurozone." Ta Nea, which supports the socialist Pasok party, said Greece was going into the polls "surrounded by uncertainty and fear over the economic collapse of the country." The election "will test the patience of Greece's partners on whether the country will stay in the eurozone," financial daily Naftemoporiki said. The markets found little comfort in a pledge by German Chancellor Angela Merkel, made alongside new French President Francois Hollande late Tuesday, that "we want Greece to stay in the euro". Merkel said the two European powerhouses were also prepared "to study the possibility of additional growth measures in Greece" if Athens sought them. But on Wednesday German Finance Minister Wolfgang Schaeuble insisted once again that it was not possible to re-negotiate the EU-IMF deal. "This is an aid programme that was prepared down to the last detail, we cannot re-negotiate it," Schaeuble told Deutschlandfunk radio. "Greece must be ready to accept the (EU-IMF) aid... Those who win the elections will have to decide if they accept the conditions or not." The euro tumbled Wednesday to a four-month low of US$1.2681 but later recovered to US$1.2707, still down from US$1.2728 in New York late Tuesday. "There is a pervading sense of unease in financial markets, a disquieting feeling of having been in something like this position before and wondering if it might turn out the same," National Australia Bank said in a note. "In Greece, there are increasing outflows from its own banking sector and broader discussion of contagion effects," it said. "The concern now is regarding contagion. It's not Greece per se that is the problem but the credibility of the euro as a currency." That contagion effect was showing up most strongly in Spain, struggling to stabilise its banking sector and get its economy growing again, where government borrowing costs were rising sharply. The yield, or rate of return, on 10-year Spanish government bonds jumped to 6.495 per cent, well above the 6.0 per cent level widely considered to be unsustainable in the long term. Italian bonds were also coming dangerously close to 6.0 per cent. Amid all the gloom and doom, Moneycorp analysts said "the underlying situation is nowhere near as predictable as these knee-jerk reactions (in the markets)." They said "there is no certainty about the political and economic flux" in the eurozone and it would likely end badly, but added that "EU leaders might pull something out of the hat to keep the euro intact". "Investors are going to have to live with this uncertainty for another month," they added.