Greece's political turmoil entered its fourth day, withcoalition talks deadlocked, raising the possibility that anotherelection will have to be held as early as next month.

Evangelos Venizelos, the socialist Pasok leader and formerfinance minister, will try to form a government when he receives athree-day mandate from President Karolos Papoulias today. Pasokyesterday rejected terms for a government set by Alexis Tsipras ofanti-bailout Syriza party, which then gave up its bid to build acoalition.

“There is no time to lose,” Venizelos said in Athens yesterdayon state-run NET television. “We can't take any decisions thatworsen the recession, increase unemployment or endanger the realeconomy. That means no new elections, no instability, nouncertainty: to remain in the euro.”

The standoff has reignited European concerns over Greece'sability to hold to the terms of its two bailouts negotiated sinceMay 2010. With Parliament split and policy makers in Berlin andBrussels urging Greece to stay the course, the country at theepicenter of the debt crisis is again facing the risk of an exitfrom the euro.

Tsipras, whose party came second in the May 6 vote, failed toreach a deal with other leaders after giving them an ultimatum torenounce support for the European Union-led rescue in order toenter government. New Democracy leader Antonis Samaras, whose partycame in first, gave up trying to forge a coalition after six hoursof talks on May 7.

“New elections are the most likely possibility,” SpyrosEconomides, a senior lecturer at the London School of Economics,said in a telephone interview. “The coalition math from the May 6vote just doesn't add up.”

Tsipras demanded Samaras and Venizelos send a letter to the EUrevoking their written pledges to implement austerity measures.Both Samaras and Venizelos rejected the request. Samaras said hewas being asked “to put my signature to the destruction ofGreece.”

European governments cannot force Greece to stay in the euro ifGreek citizens decide to leave, German Finance Minister WolfgangSchaeuble said.

Greek Exit

“They will decide whether to stay in the euro zone or not,”Schaeuble said at a conference sponsored by German broadcaster WDRin Brussels yesterday. “If Greece decides not to stay in the eurozone, we cannot force Greece.”

The repercussions of a Greek euro-exit are “potentially huge,”said Gillian Edgeworth, a London-based economist at UniCredit. “Thechances of Spain needing official aid would increase, withimplications for spillover to others.”

Rio Tinto Group, the third-biggest mining company, said any exitby Greece from the bloc would significantly destabilize theregion's economy and hurt global confidence.

“Clearly if Greece would leave the euro it would destabilize theEuropean economy to a significant extent,” Jan du Plessis, chairmanof London-based Rio Tinto, told reporters today in Brisbane. “It'sone of the things we keep an eye out on all the time.”

The risk of Greece leaving the euro by the end of 2013 has risento as high as 75 percent, Citigroup Inc. said May 7. More than 50percent of investors predict a nation to exit this year as Greece'selection impasse threatens to push the debt crisis to new depths,according to the Bloomberg Global Poll.

Greece's benchmark ASE Stock index rose 1.5 percent to 624.29 inAthens today at 10:12 a.m. Frankfurt time, after losing about 10percent in the previous three days. Standard & Poor's 500 Indexfutures expiring in June rose 0.3 percent, while the MSCI AsiaPacific Index was little changed. The Stoxx Europe 600 Index fell0.3 percent and the euro was little changed at $1.2946.

New Democracy and Pasok, rivals until the country's crisis madethem pro-bailout partners in a national government last year, aretwo deputies short of the 151 seats needed for a majority in the300-seat chamber. New Democracy won the election with 19 percent ofthe vote, gaining 108 seats, thanks to a rule that gives thefirst-place party 50 extra seats.

Syriza came second with 17 percent, winning 52 seats, and Pasokplaced third with 13 percent, or 41 seats. Five parties opposed tobailout policies are now represented in parliament.

End to 'Charade'

The Communist Party of Greece, which opposes the country'smembership in the EU and has refused to join any coalitiongovernment, called for fresh elections to put an end to the“charade” of the parties trying to form a government.

Under Greece's election system, the president can give each ofthe three top vote-winning parties a mandate to form a governmentthat can last for as many as three days. If the process still failsto yield a coalition, the president must try to broker a governmentof national unity, the constitution says. If that fails, newelections are held.

Tsipras had said he aimed to link up with parties in agovernment that would nationalize banks, place a moratorium on debtpayments and cancel the bailout and measures such as labor reformsand pension cuts.

Samaras said that his party is prepared to support a minoritygovernment as long as it ensures Greece's membership in the euroand its national interests.

Venizelos said Pasok's proposal for a national unity governmentwith all parties with a pro-European orientation was the onlysolution. Greece must remain “safely” within the euro whilepursuing changes to the bailout accord to boost growth, hesaid.

International creditors called on Greek leaders to hold to theagreed terms of their EU-International Monetary Fund bailouts.

Chancellor Angela Merkel said growth in the euro area must bespurred through “structural reform” rather than debt-fundedstimulus programs.

“To say this unequivocally: growth through structural reform issensible, important and necessary,” Merkel told lawmakers in Berlintoday. “Growth funded by debt — that will just lead us back to thebeginning of the crisis. We can't do that and we won't dothat.”

For now, bailout money is still flowing to Greece. The EuropeanFinancial Stability Facility yesterday confirmed that a 5.2billion-euro ($6.7 billion) tranche will be released by the end ofJune, with 4.2 billion euros disbursed today. The remaining 1billion euros will be released depending on Greece's financingneeds.

Under the terms of the bailout a new government will need todetail savings of 11 billion euros next month. Greece doesn't needany more aid until July, German Deputy Foreign Minister MichaelLink said during a parliamentary hearing in Berlin yesterday.

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