Positioning for the June election moves to the top of politicians' to do lists in Greece

05/08/2012 1:56 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Strike two in Greece.

A day after election leader New Democracy said it couldn’t form a government, Alexis Tsipras, leader of the left-wing Syriza coalition, announced terms that pretty much guarantee that Syriza, which came in second in the election, won’t be able to form a government either.

According to Tsipras today, to join a Syriza-led coalition government a party would have to pledge to

1) Cancel all impending cuts to pensions and salaries agreed as part of the bailout plan

2) Cancel all impending changes to the labor market such as rules that would make it easier for companies to fire workers

3) Abolish the law giving members of Parliament immunity from prosecution

4) Investigate Greek banks

5) Set up an international audit committee to investigate the cause of Greece’s public deficit and the declaration of a moratorium on all debt servicing until the audit is published.

That’s more than enough to kill any chance that the New Democracy or Pasok parties, which came in No. 1 and No. 3 in the election, would join in any Syriza coalition. (Especially because these two parties were in power as Greece ran its deficit to the moon (New Democracy) and as Greece signed the first bailout deal (Pasok.)  Think somebody might worry about an investigation if parliamentary immunity is abolished?

And just in case those conditions weren’t enough, Syriza has called for government control of all Greek banks.

Unless I’ve missed my guess this set of demands isn’t at all about forming a coalition government, but about positioning Syriza for new elections in June.

It may take the full three-days allowed under Greek law for Syriza to conclude it can’t form  a coalition, but I think Pasok will get its shot at forming a new government very soon. The chances of a Pasok-led coalition seem to be close to nil. And if Pasok can’t put together a government, it’s three strikes, you’re out and new elections.

So look for a 30-day caretaker government set up to supervise new elections in June. Could a new election break the deadlock? It’s possible. Turnout was just 65% in this round, an all-time low, so there are a lot of potential votes up for grabs in a second vote. And if the German government turns up the pressure by repeating, “Greece has no choice, Greece has no choice”, in reaction I think a “No to the bailout” coalition could win a majority.

Which would, of course, mean that Greece is headed out of the euro when the Greek government (if there is one) runs out of money in August (or before) and the troika of the International Monetary, European Central Bank, and the European Commission refuses to pony up the next payment.

Related Articles on STOCKS