Greece goes to Socialists in round three after radical leftists and conservatives fail to form government

ATHENS // Greece's socialists took their shot at forging a coalition government yesterday after two other parties failed and the prospect of a new election grew.

The negotiations were watched closely by international partners who warned the country it must stick to its austerity programme or abandon the euro.

Last night, Evangelos Venizelos, the Socialist party leader, said the chances were good for a pro-European coalition that will keep bailout-dependent Greece in the shared European currency.

Hours after receiving the presidential mandate to lead government-forming talks, Mr Venizelos said a small left-wing party was close to his pro-bailout position and could give him the majority he needs.

The once-dominant Socialist party finished a third in Sunday's elections after voters angered by crushing income cuts imposed to secure Greece's rescue loans abandoned mainstream politicians and backed parties promising to end the austerity.

They gave 21 of parliament's 300 seats to the extreme-right Golden Dawn group that wants to mine Greece's borders and send illegal immigrants to labour camps.

The coalition-building talks exclude Golden Dawn, which rejects the neo-Nazi label but has been blamed for violent attacks against immigrants. But the other six parties elected have failed to agree on a ruling coalition over the past four days.

"Things are not easy," Mr Venizelos said after receiving the mandate from President Karolos Papoulias. "I am not declaring myself optimistic. But I am declaring myself responsible, and dedicated to this aim that I believe serves the national interest."

He is the third party leader to try, after Antonis Samaras, whose conservative New Democracy won the most votes, and runner-up Alexis Tsipras, who heads the Radical Left Coalition, or Syriza.

Mr Venizelos has three days to strike a deal - which would have to include the conservatives and either the smaller Democratic Left or Mr Tsipras' party to gain a majority of 18-51 seats.

If his efforts fail, Mr Papoulias will convene all the party leaders in a last-ditch attempt to cobble together a coalition. If that is also unsuccessful, new elections will be called for early June, prolonging the political uncertainty.

The major stumbling block has been Mr Tsipras' insistence that the austerity programme, without which the flow of rescue loans from the International Monetary Fund and other eurozone countries would dry up, be cancelled or frozen. Both Mr Samaras and Mr Venizelos argue such a move would be catastrophic for the country, and would force Greece out of the euro.

In a letter to European leaders yesterday, Mr Tsipras said the election result left Greece's bailout commitments devoid of "political legitimacy," but stopped short of demanding that the programme should be scrapped and debt repayments halted.

Mr Tsipras said the cutbacks have failed to address the country's problems, are "destroying" the recession-bound economy and threatening to create a Greek "humanitarian crisis."

"We must re-examine the entire framework of the current strategy, as it not only threatens social cohesion and stability in Greece, but also creates instability for the European Union itself and the eurozone," he said, in the letter to EU President Herman Van Rompuy, European Commission President Jose Manuel Barroso and European Central Bank chief Mario Draghi.

But German Finance Minister Wolfgang Schaeuble said there was no way around Greece sticking to agreed austerity measures if it wants to stay inside the eurozone.

Mr Schaeuble categorically ruled out any renegotiation of the agreements, saying calls to do so didn't chime with the current economic reality.

Athens has promised to pass new austerity measures worth €14.5 billion (Dh69bn) next month and to implement other reforms. These will be reviewed by its creditors, who will then determine whether to continue releasing rescue loans that are keeping Greece solvent.

The eurozone's bailout fund, the European Financial Stability Facility, released a €4.2bn batch of rescue loans yesterday, while another €1bn is expected in June depending on Athens' needs.

Markets, in the doldrums since Greece's election stalemate, partially rebounded yesterday, with shares on the Athens Stock Exchange closing 4.2 per cent up. But new Greek unemployment figures showed the jobless rate reaching 21.7 per cent in February.