Greece has formally dissolved parliament ahead of a general election on January 25th. The election has cast the country's international bailout into doubt and set financial markets on edge, coming as the eurozone deals with renewed signs of weakness.
The traditional decree calling new elections was posted on the door to parliament two days after lawmakers rejected prime minister Antonis Samaras’s candidate for president, automatically triggering a return to the polls.
The January 25th vote will mark a showdown between Samaras's conservative New Democracy party, which imposed unpopular budget cuts under Greece's bailout deal, and the left-wing Syriza party of Alexis Tsipras, who wants to cancel austerity measures along with a chunk of Greek debt.
Opinion polls show Syriza holding a lead over New Democracy, although its margin has narrowed to about three per cent in the run-up to the vote.
However, weakness among the small parties that either Syriza or New Democracy would need to form a stable coalition has also added to the uncertainty and raised the possibility that the next government may not survive for long.
Mr Tsipras, who says he wants to keep Greece in the euro, has sought to present a more moderate face to financial markets and reassure voters that a Syriza-led government would not raid their bank accounts.
The potential arrival of a government openly opposed to the international bailout keeping Athens from bankruptcy has fuelled a nervous mood in the financial markets, even if the impact has been more limited than in past crises.
Ratings agency Fitch said the new elections added to the credit risk surrounding Greece, creating political uncertainty likely to persist for months.
Officials from the European Union and International Monetary Fund (IMF) bailout "troika" had been due to resume negotiations in Athens next month to agree disbursement of a final 7.2 billion euro tranche, as well as a post-bailout credit line.
However, the IMF said this week that negotiations would only begin once a new government is in place and noted that Greece had no immediate funding needs.
Even before the recent political uncertainty, there were signs Samaras’s ruling coalition had been slipping behind on its reform targets and a closely fought election will increase resistance to promised measures including privatisations and job cuts in the public service.