Greece will hold new elections on June 17, state media reported Wednesday, amid a political and economic crisis that could have effects far beyond the country’s borders. News of the election date came as Greeks pulled hundreds of millions of euros out of the banking system amid fears that the country will not be able to stay in the European Union’s single currency. Just 10 days ago, Greeks voters punished the major parties for harsh budget cuts, leaving no party able to form a government. A caretaker administration led by a senior judge will run the country until the new vote.
Interim Prime Minister Panagiotis Pikrammenos was sworn in Wednesday. The president’s office said Cabinet ministers will take their oaths of office Thursday morning. The political deadlock is leading to fears that Greece will not have a government in place when it needs to make critical debt payments, which could in turn jeopardize its place in the eurozone, the group of 17 European Union countries that use the euro currency. And a Greek crisis could spread, one analyst warned.
“If Greece exits the euro it won’t be alone. Others will exit,” said Paul Donovan, a global economist with UBS bank. “There would be bank runs across multiple countries,” he predicted. “Citigroup, for example, may not be exposed to Greece, but it may be exposed to Portugal, Spain, France. … It may be exposed to a company that’s exposed to France, or exposed to exports to EU.”
In a worst-case scenario, he said, “you’re talking about widespread defaults in the corporate sector as well as the sovereign sector. It becomes very problematic.” Even so, most major European stock markets ended the day Wednesday virtually unchanged. European leaders were united Wednesday in saying they want to help Greece stay in the euro. As Greek politicians met Wednesday to set the new election date, German Chancellor Angela Merkel said she regrets the suffering of the Greek people in the face of harsh government budget cuts. “It’s very bitter, obviously,” she said of the austerity measures that have left some Greeks struggling to pay for food or utilities. But, she said, “Sacrifices had to be made. … I think these are necessary measures that had to be taken.”