This story has been updated. See the note below.
REPORTING FROM ATHENS -– Greeks will go to the polls May 6 in what is shaping up to be a hotly contested race whose uncertain outcome could complicate attempts to fix the country's economy and further deepen Europe’s debt crisis.
The election announced Wednesday will mark the end of Prime Minister Lucas Papademos' 5-month-old coalition, which put the 64-year-old technocrat at the helm of government last November in a bid to push through tough economic reforms in exchange for a new, $170-billion bailout and a landmark debt-restructuring deal designed to ward off a Greek default.
Papademos, a former vice president of the European Central Bank, will not be a candidate in the election.
[Updated April 11, 1:03 p.m.: He warned fellow Greeks that tough choices will face the new government, including steps to meet as much as $17 billion in added budget cuts Athens has committed to as part of a new austerity program through 2015.
“Greece is halfway through a difficult course,” he told voters in a nationally televised address. “The social and financial costs have been steep. Fatigue, resentment and exasperation in some cases is understandable. But I want to be clear: No one can render a painless way out" of the crisis.]
The elections will be Greece’s first since it unveiled alarming debt and deficit figures in late 2009, touching off a financial crisis that has since spread across Europe. Greece has sunk into its worst recession in almost a century, putting one in five workers out of a job and pulling thousands of Greeks onto the streets to protest brutal budget cuts, tax hikes and reductions in pensions and salaries.
The economic and social upheaval has shaken the Greek political system, which has traditionally been dominated by two parties. Recent polls show that neither the Socialists nor the conservative New Democracy party is in line to win enough seats in parliament to form a government. At the same time, a number of small anti-austerity parties appear to be gaining ground, creating the potential for a highly fractured parliament.
With only New Democracy and the Socialists backing the controversial bailout deals that are keeping Greece afloat, observers believe the two traditional heavyweights may have no other option than to form a new coalition to reassure the nation's creditors that Greece would stick to its program of spending cuts and economic reform.
European officials and foreign lenders fear that the elections may distract Greece from those commitments. In a recent report, the International Monetary Fund warned that Greece “remains accident-prone with little ... if no room for any slippages.”
“Any politicians that get elected will have to bow to economic realities,” said Thomas Kressin, head of foreign-exchange operations in Europe for Pacific Investment Management, the world’s biggest bond-fund manager. “There is a very narrow degree of freedom in what politicians can do without creating troubles in the market.”
Fresh concern over the Eurozone surfaced this week as borrowing costs for Spain, the Eurozone's fourth-largest economy, rose to worrisome levels.
-- Anthee Carassava
Photo: Crowd-control barriers surround the Greek parliament building, where no party may have a majority after elections set by Prime Minister Lucas Papademos for May 6. Credit: Thanassis Stavrakis / Associated Press