President fails again to form Greek coalition but calls for cuts continue

Greek Presidential guards perform in front of the tomb of the Unknown soldier in central Athens (AFP/Getty Images)

Greece's search for a government to prevent the country's disorderly exit from the euro went on into last night with little sign of an agreement. After a week in which party leaders have failed to form a coalition, it fell to the Greek President to make a final appeal to politicians to prevent a further period of uncertainty and fresh elections next month.

Karolos Papoulias met yesterday with the heads of the three biggest parties after last week's elections, but talks ended in stalemate last night. He has until Thursday to broker a deal.

Hopes hinged on a last-minute change of mind from Fotis Kouvelis, who leads a moderate left splinter group which could help the conservatives and socialists, who came first and third, to get the parliamentary majority they would need to govern.

Should no agreement be found, Greece is expected to vote again – with 17 June the likely date – under intense pressure over its future in the eurozone. The campaign would be dominated by a clash between parties who believe Greece must meet the terms of its loan agreements with international creditors in order to stay in the single currency and other parties who claim that those agreements can be scrapped without falling out of the euro.

"Greeks are caught with a mountain of debt behind them and the cliff's edge of exit from the euro in front of them," said Theodore Pelagidis, Professor of economics at the University of Piraeus. The author of a book on understanding the crisis, he said that the same clientelism that had taken over the political system had caused a breakdown in the education system, leaving many Greeks unable to understand the crisis.

"They don't have the tools to understand the reality, they just want to go back," said Professor Pelagidis.

The European Central Bank, the German government and Greece's other EU partners have all warned Athens that no substantial renegotiation of the last €130bn bailout will be allowed.

They have called on Greece to honour its agreements regardless of the popular resistance at home. Signals have now been sent to the market that the eurozone could withstand a Greek exit.