What happens if greece can form a government

However, a senior EU official said a non-payment to the IMF would not automatically trigger a default on euro zone government loans to Greece. The next big question would be how long the European Central Bank was prepared to continue authorizing emergency lending to Greek banks, which is secured partly on the bonds of a defaulting government.

The ECB's policy-making governing council has been conferring weekly since February on the ceiling for emergency liquidity assistance ELA from the Greek central bank to commercial lenders, which has been raised incrementally to the current The ECB might freeze or lower that ceiling, or increase the so-called "haircut" or discount it applies to collateral presented by Greek banks, both government bonds and private loans, which would presumably be deemed at greater risk.

Greece's next major repayment hump comes in July and August, when it has to redeem bonds held by the ECB for a total value of 6. Even if the central bank continued limited funding for Greek banks after a government default on the IMF, the political pressure to pull the plug if Athens defaulted on the ECB would likely be overwhelming, people familiar with the situation say.

There might be calls by some euro zone creditors to suspend payment of funds from the European Union budget to Greece, although there would also likely be pressure from civil society organizations to provide humanitarian aid as the Greek economy reeled from the impact of a default.

How much longer the Greek government would be able to go on paying civil servants, pensioners and essential suppliers is not clear. The state budget is close to primary balance before debt service and the government has ordered public authorities to hand over all spare cash to the central bank.

However, tax revenue would be likely to dwindle due to the uncertainty caused by a government default. Many suppliers say they have not been paid for months, and at some stage, the government might have to pay all or part of its payments in IOUs. As before, a double election would prolong and aggravate economic and financial pressures in Greece. The troika programs would expire, and its members would not be inclined to support Greece in the absence of a government.

Political uncertainty in affluent but aging societies can produce tough decisions if the economic slump is severe enough. Demands for radical action can come from youthful populations, as in the Middle East today or in Europe in the s.

But for Europe today, the threat of deeper economic crises is not likely to lead to radical political outcomes. Rather, electorates tend to want to preserve the perceived stability of the threatened status quo, and in the case of Europe, unlike other parts of the world, the safe haven status is the European Union.

Greece has only recently exited a deep recession, moreover, and growth returned in the third quarter of last year. Greece is not likely to want to take the risk of jeopardizing its recently found economic stability. As in , Samaras will probably benefit most from a further deterioration of the economic situation.

His chances of being reelected in a new election in March would be higher than on January A Samaras victory would bring the New Democracy party the bonus of 50 parliamentary seats for the party with the most votes, enabling him to form a new majority government with one or more coalition partners—resulting in a status quo election.

Should this occur, Greece can arrange a quick new program with the troika, though the negotiations would not be easy. A host of unfinished reforms from the current program remain to be implemented before any new program can be negotiated. Samaras could probably count on some limited flexibility from the troika on timing, but not content, including some form of temporary liquidity provision and debt rollovers during If Samaras can resume the reform agenda, he might be able to resurrect a transition into a precautionary ESM credit line later in For Samaras to win, fear about the future will have to trump anger about the present among Greek swing voters.

He will therefore likely stoke fears about Syriza, raise economic pressures, and paint Alexis Tsipras as a radical who would send Greece on a new downward spiral. He may also be helped in this regard by his euro area partners. The German magazine Der Spiegel recently quoted anonymous German government sources that a Greek exit from the euro area could be managed without harming other countries, a far cry from the alarm of a couple years ago.

A bank run, in which depositors begin taking their money out of Greek banks before January 25 would improve his chances further. A Syriza victory, with its 50 bonus parliamentary seats, would make Tsipras prime minister as head of a multiparty coalition. Most potential coalition partners would probably be from the left.

Radical leftists are unlikely to join, however, because they would benefit from continuing as a protest movement.

Whether Tsipras can negotiate a new troika arrangement that is also acceptable to his own party is highly uncertain. A large part of Syriza is radically anticapitalist and unlikely to change its views once in the government. The euro area can thus afford to wait until the economic situation puts pressure on Syriza, forcing Tsipras to decide whether to risk tipping a new downturn by rejecting a new troika arrangement or a breakup of his government that would come from ditching most of its electoral platform.

The Communists have already refused to join. If New Democracy stayed out of parliament for a confidence vote, rather than opposing it, Tsipras might win a majority. His opening salvo seems to have rendered these calculations academic. And even if such a government was formed, analysts say, it would be very fragile and last only a few months. EU officials have rejected any compromise on the terms of the bailout and without it, Greece would run out of money by the end of June, officials estimate.

European Central Bank board member Joerg Asmussen became the latest European official to say the bailout could not be renegotiated and there were no alternatives if Greece wanted to stay in the euro zone. Chris Williamson, chief economist at London-based research firm Markit said the election had moved Greece deeper into crisis and uncertainty after the election. Out on the streets, Greeks already depressed by the economic crisis expressed apprehension about what would happen next.