French president warns Greeks June 17 vote critical to their staying in eurozone

ATHENS, Greece – The new French president has warned Greeks that if they vote to move away from international bailout commitments in the upcoming election, they could be pushed out of the eurozone.

Greece holds a repeat election June 17 after an inconclusive May 6 ballot left no party with enough Parliamentary seats to form a government, while and coalition negotiations collapsed. Voters deserted the two formerly main parties in favour of smaller, mostly anti-bailout groups on the right and left of the political spectrum.

“I respect the Greek people. They will decide what they want on the occasion of the election” Francois Hollande told the private Mega television station in an interview aired Wednesday.

“But I must warn them, because it is my duty, because I am a friend of Greece, that if the impression is given that the Greeks want to move away from the commitments that were taken and abandon all prospects of revival, then there will be countries in the Eurozone that will want to end the presence of Greece in the eurozone.”

Greece’s prolonged political deadlock has spooked markets, raising fears it could leave the 17-nation eurozone and default on its massive debts. That, in turn, could further exacerbate Europe’s debt crisis, causing borrowing rates for debt-strapped Spain and Italy to soar and even threatening the viability of the joint currency itself.

Antonis Samaras’ conservative New Democracy party has been running neck-and-neck in recent opinion polls with the radical left Syriza, which came in a surprise second on May 6.

Samaras has pledged to stick to Greece’s pledges for further cutbacks and reforms, with some adjustments to improve the position of poorer Greeks and boost growth, while Syriza’s leader, Alexis Tsipras, has vowed to cancel Greece’s bailout commitments.

Hollande, who won the French elections also held on May 6, said that while he wants Greece to remain part of Europe’s joint currency, Greeks “must know that this presupposes a relationship of trust.”

Opinion polls published ahead of a two-week pre-election ban showed that no party was likely to win enough votes Sunday to form a government on its own, meaning more coalition talks will be needed. If those fail, a third national ballot would be required — a prospect that would horrify European Union leaders and financial markets alike.

Samaras insisted Wednesday that his party would do “everything for there to be a government.”

The only conditions, he said, “is that we stay in the euro — we’re not playing with Europe,” and to try to amend the terms of the bailout deal to restart the moribund economy and create new jobs.

Samaras insisted that pulling out of the bailout plan altogether “would be a recipe for catastrophe. It’s an exit from the euro. We can’t accept it under any circumstances.”

He also lashed out at Syriza, saying that their plan to pull out of the bailout deal would make the country “the black sheep” of Europe.

“There are some powers in Europe who would want us to be the black sheep, so as to make an example of us,” he stressed.

Greece has been relying on billions of euros (dollars) in rescue loans from the EU and International Monetary Fund since May 2010, when the country became priced out of the market by sky-high interest rates after years of overspending and falsifying financial data.

In return, it imposed drastic spending cuts across the board, reduced public sector salaries and pensions and repeatedly increased taxes. The austerity has left Greece struggling through a fifth year of recession and sent unemployment spiraling to nearly 22 per cent. Anger against the austerity measures has led to frequent and often violent strikes and protests.

The Fitch Ratings agency said Wednesday that a Greek exit from the eurozone would have a “severe” impact on banks in Portugal, Ireland, Spain and Italy.

“A strong response from policymakers would be required to prevent contagion” — the fear that other nations would also abandon the euro — the agency said in a report.

Samaras has long said that many of the bailout conditions were wrong and has sought to change them. His party’s program would not include any more public sector firings, he said, adding that there would be no more tax hikes or salary cuts either.

“I don’t believe in and I don’t want any more salary reduction or any more taxes,” Samaras said. “Those salary reductions that were carried out destroyed the (consumer) market.”