Greece heading for early elections
Greece's government has been forced to call early national elections, stoking financial concerns as investors worry that the main opposition party will win - and then renege on the country's bailout deal.
The stock market tumbled more than 11% before recouping some of its losses on news of the election, which will be held on January 25 and was triggered by parliament's failure to elect a new president.
Investors fear the left-wing opposition Syriza party, which has a narrow but steady lead in opinion polls, might act on popular resentment over six years of government austerity and seek to drastically overhaul the international bailout deal.
At the height of the eurozone crisis in 2010 and 2011, Greece's financial turmoil risked breaking up the currency union, an event which would have shaken the global economy.
The risks today are not as great, analysts say, as little of Greece's debt is held by private investors but mainly its bailout creditors - other European countries and the International Monetary Fund.
However, should a new government seek changes to the deal, Greece's access to credit would be delayed just as its bailout loans are coming to an end. Greece still cannot finance itself independently on bond markets, so it faces the danger of a default that could hurt the finances of fellow European countries.
Conservative prime minister Antonis Samaras said national elections, the fourth in six fraught years of financial crisis, will be held "at the soonest possible date" - Sunday January 25, 18 months early.
"The country has no time to waste," Mr Samaras said in a televised address just after the presidential vote. "We came very close to the final exit from the crisis. The people must learn the truth about how easy it is to relapse into the deepest and most dramatic crisis."
In the presidential vote, his coalition's candidate for the post, 73-year-old former European commissioner Stavros Dimas, won 168 out of 300 possible votes- short of the 180 needed to win - in the third and final round of voting. According to the constitution, the vote's failure means parliament has to be dissolved within 10 days.
Syriza has pledged to roll back some of the reforms Greece implemented to qualify for 240 billion euros in rescue funds, but it has recently softened its rhetoric about unilaterally pulling out of the bailout deal.
Syriza leader Alexis Tsipras said today's vote marked a "historic day for Greek democracy".
"When the majority of the people is determined to end the policies of the bailout agreements and austerity, then lawmakers can do nothing else than respond to their duty to keep in line with the will of the people," he said.
"Today Mr Samaras's government, which for two and a half years plundered our society and had already decided and committed to take new measures, belongs to the past. With the will of our people, in a few days, the austerity agreements will also belong to the past."
Greece lost market confidence and nearly went bankrupt in 2010 after years of profligate spending, dodging public sector reforms and hiding the extent of its bloated public deficit and debt.
The EU-IMF bailouts kept the country afloat but drastic belt-tightening demanded by creditors hammered incomes and living conditions, sending unemployment to a post-Second World War high. Ensuing resentment fuelled support for anti-austerity parties, from Syriza - whose pre-crisis support was under 5% - to the neo-Nazi Golden Dawn.
Mr Samaras, 63, presided over a historic coalition that united his conservative party with their historic socialist rivals to hammer out further draconian spending cuts that balanced the budget after decades and led to a modest economic recovery this year.
The International Monetary Fund said Greece's stalled bailout review will resume only after the new government is in place.
IMF spokesman Gerry Rice said Greece faces no immediate financing needs.
Greece's talks with its bailout creditors have been stalled for months amid disagreements over the need for new spending cuts.