Greeks head to the ballot box in two days for a contest that maydetermine the fate of the world's first democracy and the future ofthe newest reserve currency, while roiling markets from Wellingtonto Wall Street.

Almost 10 million Greeks will vote for the second time in sixweeks after a May 6 ballot failed to yield a government. Theconstitution permits a third election too. The final polls,published on June 1, showed no party set to win a majority. Exitpolls will be released when voting ends at 7 p.m. in Athens, with afirst official result estimate due around 9:30 p.m.

The June 17 vote will turn on whether Greeks, in a fifth year ofrecession, accept open-ended austerity to stay in the euro orreject the conditions of a bailout and risk the turmoil of becomingthe first to exit the 17-member currency. World leaders have saidthey'd prefer a pro-euro result, underscoring concern over globalrepercussions.

“I want Greece to remain in the euro zone, but Greeks mustunderstand that this requires a relationship of trust,” FrenchPresident Francois Hollande said June 13 in an interview withAthens-based Mega TV. “If the impression is given that the Greekswant to distance themselves from their agreed commitments and toabandon every prospect of recovery, there will be countries in theeuro zone that will prefer to terminate Greece's presence.”

Syriza, the party that promises to renege on Greece's end of thebailout deal, and New Democracy, which backs the rescue, ran evenin final opinion polls. The socialist Pasok party, which won the2009 election and led the country into the bailout, was third atabout 13 percent.

Now in its third year, the European debt crisis has rounded backto Greece, which sparked the turmoil in October 2009 when PasokPrime Minister George Papandreou revealed a deficit four times morethan European rules allowed. Greece has since gotten rescuepackages totaling 240 billion euros ($303 billion). The ballot willbe a first test for a 100 billion-euro firewall for Spain, which onJune 9 became the fourth euro country to seek a rescue.

“Core euro members are going to great lengths to make sure thatGreece would not be replicated elsewhere,” Holger Schmieding, chiefeconomist at Berenberg Bank in London, said in an e-mailed responseto questions. “If need be, the firewalls would be strengthened. Butnew money will only go into the firewall, not to Greece.”

Next Flashpoint

Central banks intensified warnings that Europe's failure to tameits debt crisis threatens to roil the world's financial markets andeconomy as Greece's election looms as the next flashpoint forinvestors.

Spain's 10-year bond yield vaulted to 7 percent yesterday in afresh sign of the stress that has plagued the region for twoyears.

“What has raised the stakes since Spain requested externalfinancial assistance last weekend is the glaring disconnect betweenmarket sentiment, which has become ever more binary, and Greekpolitics which has become ever more blurred,” Nicholas Spiro,managing director at Spiro Sovereign Strategy in London, said in ane-mailed response to questions. “It's as clear as the light of daythat Sunday's election result is not going to be a market-friendlynor a conclusive one.”

Stocks rose and commodities climbed for a second day onspeculation central banks will take steps to boost economies asEurope's debt crisis saps growth. Spanish, Italian, U.K. and U.S.bonds advanced. The MSCI All-Country World Index added 0.5 percentat 7:45 a.m. in New York, heading for a second weekly gain.Standard & Poor's 500 Index futures increased 0.3 percent. Theyield on the Spanish 10-year bond dropped five basis points to 6.86percent.

The euro, created in 1999, has lost 3.6 percent since May 6,when Syriza's second-place finish increased the prospect of a Greekexit from the currency union. New Democracy won 18.9 percent in theMay 6 election and Syriza got 16.8 percent.

A possible Greek departure from the euro has cast a pall aroundthe world. President Barack Obama has blamed the euro crisis for aslowdown in U.S. employment growth.

“It's in everybody's interest for Greece to remain in the eurozone, while respecting its commitments to reform,” Obama said June8. “European leaders understand the need to provide support if theGreek people choose to remain in the euro zone. But the Greekpeople also need to recognize that their hardships will likely beworse if they chose to exit.”

G-20 Summit

Taiwan's Premier Sean Chen plans a Cabinet meeting, tentativelyscheduled for June 19, to discuss strategy after the Greekelection. European finance ministers plan to issue a statement at asummit of world leaders in Mexico scheduled for June 18-19.

“Greece was the first default, now it would be the first exitfrom the euro,” Riccardo Barbieri, chief European economist atMizuho International Plc, said in an e-mailed answer to questions.“The ECB and other European institutions must be ready to interveneif necessary to support Spain and Italy but this inevitably entailsa further accumulation of sovereign risk. Until the markets seethat there is a line of defense, uncertainty will remain veryhigh.”

Syriza leader Alexis Tsipras has pledged to keep Greece in theeuro even while scrapping state-asset sales, civil service job cutsand wage and pension cuts. Bailout proponents, such as NewDemocracy leader Antonis Samaras, say Tsipras's policies riskforcing Greece out of the euro and causing hyperinflation, bankruns and widespread poverty.

Standard & Poor's said in a June 4 report that the chance ofGreece leaving the euro area in coming months was one-in-three.

“Both Samaras and Tsipras want to renegotiate Greece's bail-outagreement,” said Spiro. “The difference between the two is thatTsipras is more willing to gamble with Greece's membership of theeuro.”

New Democracy led Syriza by 22.7 percent to 22 percent,according to an ANT1 TV poll on June 1, the last date surveys weremade public in accordance with Greek election law. As the stakesrise for Greeks, along with the temperature, campaigning has becomemore urgent. Posters for Syriza, promising a path to hope, vie forspace in Athens with New Democracy posters.

Samaras, who will hold his final campaign rally in centralSyntagma Square in Athens tonight, said on June 13 that the choicesfacing Greeks at the ballot-box are stark: “government orinstability; the euro or drachma.”

'European Future'

“The dilemma is whether Greece has a European future,” DimitrisPapadoukis, 53, an employee at the state-owned Hellenic Post SA,said. “That is first and foremost. We may have delayed, or mademistakes, but that doesn't mean we should go back decades.”

Papadoukis spoke outside New Democracy's election pavilion inSyntagma Square, the site of anti-government rallies exactly a yearago that drew as many as 50,000 protesters. He says he will votefor Samaras even though he knows he may lose his job as part of thespending cuts demanded by the troika of creditors from the EuropeanUnion, the European Central Bank and the International MonetaryFund.

The spending reductions demanded by the troika to bring thecountry back to financial health have included cuts to pensions andthe minimum wage amid tax increases, pulling Greece into a fifthyear of contraction and spurring unemployment to a record of morethan 22 percent. Tsipras has tapped into that pool of growinganger.

“The bailout governments have driven the country tocatastrophe,” Tsipras said in a Bloomberg Television interview onJune 13. “What's surprising is that these people who have run thecountry aground are still demanding they govern, to finish off thejob.”

German Finance Minister Wolfgang Schaeuble, in comments to Sternmagazine published on the same day, said he had “really greatsympathy with the man on the street in Greece.”

“But I can't spare him that,” he said. “The Greek minimum wageis just dropping to the level of Spain. If the country wants tobecome competitive again, it has to sink.”

Worried Greeks have stepped up the pace of withdrawing theirsavings before the elections on concern the nation may move closerto abandoning the euro, bankers familiar with the situation said onJune 13.

Bank Outflows

Deposit outflows jumped in the days following the May 6 electionand were as much as 6 billion euros in May, Athens- basedKathimerini newspaper reported June 9, without saying where it gotthe information. Greek bank deposits by businesses and householdsrose to 166 billion euros in April from 165.4 billion euros theprevious month, according to a statement by the Bank of Greece onits website on May 31.

The outflow is increasing the strain on a banking system thathas suffered since the beginning of the crisis. An exit from theeuro would cut lenders off from access to ECB funding.

Vassilis Fanis, 42, a hospital employee, said he voted forSyriza on May 6 and now doesn't know if he'll cast his vote forTsipras again. He said he'll vote for the “lesser of two evils”without saying who that is.

Tsipras “doesn't seem to want to form a government,” Fanis said.“They know it's difficult and they have no solutions.”

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