Greece: Greek government on knife edge as coalition party pulls out

Officials ruled out snap elections and Mr Samaras was set to swiftly overhaul his cabinet council to reassure Greece’s European peers and the International Monetary Fund that his reform-minded government was up and running.

At least two ministers from the Democratic Left were due to be replaced, including Antonis Manitakis, the minister of public administration, who infuriated creditors with his resistance to mass public sector layoffs and the closure of state organizations. An additional two deputy ministers were clearing out their government offices, preparing to resign, party officials told the Telegraph.

A flurry of emergency meetings and votes at the Democratic Left headquarters on Friday pooled resounding support for the pullout, a move proposed by the party’s leader, Fotis Kouvelis. A soft-speaking grandfatherly-like figure of the leftist party, Mr Kouvelis had stormed out of crisis talks with the prime minister and his socialist counterpart, Evangelos Venizelos of PASOK, late on Wednesday, refusing to sign up to a compromise solution over the sudden switch-off on June 11.

“It was very difficult to continue,” he said. “There was serious disagreement [with the Prime Minister].”

The departure of Democratic Left and the support of its 14 lawmakers from the government leaves Mr Samaras relying on the socialist PASOK party, alone, to press ahead with the vital reforms — including 15,000 public sector layoffs by 2014 – that international lenders want in exchange for continued bailout funds.

The two remaining parties commands a slim three-seat majority in Greece’s 300-member parliament. Still, a duo of independent lawmakers have pledged to back the government’s fiscal policies, while Mr. Kouvelis conceded that he would passively support the government from the backbenches of parliament.

“Reforms should continue,” he said. “We stand by our core belief that that the country should stay within the euro.”

While the coalition may be able to corral enough support to survive in the near term, the Democratic Left pull-out casts a pall over its fate and that of the country’s troubled bailout programme.

“Even if it survives for now, a limping government can not last for long,” said John Loulis, a leading political strategist. “There will be more crises. They won’t be able to push reforms.”

“At some point — sooner rather than later we’ll have early elections,” he added.

Greece plunged into political crisis when the Prime Minister shut down ERT, sacking all its 2656 employees because of what he called a “sinister operation of waste and corruption.” The heavy-handed, abrupt move – with millions of television screens left black and scores of radio signals dead – touched off fiery protests, provoking a powerful political backlash.

For days, both of the premier’s governing partners insisted the 75-year-old network resume broadcasting, allowing restructuring to take place while it was in operation.

To defuse tensions, Mr Samaras offered earlier this week to hire back some 2000 employees for three months, until a new entity with a leaner and more efficient workforce was set up. But it was not enough to keep the Democratic Left in the coalition fold.

Greece’s fresh political turmoil coincides with a new hitch in the country’s multi-billion dollar bailout, following a potential funding shortfall due to the reluctance of some eurozone central banks to roll over their holdings of Greek government bonds, Reuters reported.

As a result Greece saw its borrowing costs spike on Friday with 10-year government bond rising to their highest level – 11.35 – percent since late April. Greek stocks sank by nearly 3 per cent.