Debt crisis: Greek vote keeps markets guessing

Spanish banks may have secured a ?100bn rescue deal, but Greeks will vote on Sunday in a re-run of last month's inconclusive election that could potentially lead to its departure from the common currency.

Polls have shown that Syriza, a radical Leftist coalition opposed to the austerities of the country's mammoth bail-out, is only narrowly behind New Democracy, a centre-Right party that broadly concurs with the rescue deal.

Though Syriza officially committed to the euro, the determination of its charismatic leader Alexis Tsipras to fashion a new deal with the troika of the International Monetary Fund, European Commission and European Central Bank that now supervise the Greek economy could well see lenders quickly cut the purse strings, so forcing Greece to a calamitous return to the drachma.

Rather than see the Spanish deal as a sign that a firewall has been built that would exclude Greece, Syriza said yesterday the rescue proved the argument that the austerity imposed by the troika had failed.

Conservative leader Antonis Samaras said the Spanish deal showed that Greece had more to gain by negotiating with its European partners than by falling out with them.

Greece may only account for 2pc of the eurozone's output, but it remains Europe's most troubled economy. Its debt as a percentage of GDP was 165pc in 2011. It is still running a capital deficit and the reforms demanded by its international creditors have only been weakly implemented.

The government has been in stasis since the first election on May 6, and the rest of the world will be watching anxiously to see it if a coalition can be formed that is capable of reassuring the markets.

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