Early Greek election looms as stock market dives again

The Greek government admitted that dissent within the ruling Syriza party was likely to force an early election, as bank shares plummeted again on the Greek stock market.

Government spokesperson Olga Gerovasili said that early elections were “likely” and that the government would not form a national unity government.

"A solution will be found, since the country needs a strong government," Gerovasili told private Skai television. "[Early] elections are likely but that doesn't mean we will be dealing today with when they will take place."

The Greek main stock index lost another 1.2% on Tuesday, the second day the Greek stock market has been open following a five-week shutdown. Most shares traded higher but banks tumbled, once again hitting the 30% lower trading limit. The overall index on Monday plummeted 16.2%, its worst drop in decades.

The Greek economy is reeling from the impact of limits on money withdrawals and transfers that the government imposed at the end of June to prevent a collapse of the Greek banks. Uncertainty over Greece's negotiations for a third bailout and over the stability of the government have heightened concerns.

However, European markets were unaffected by the Greek market nosedive, which Italian Finance Minister Pier Carlo Padoan shrugged off as "normal market behavior in exceptional circumstances."

"Frankly I am not concerned. Looking at the figures, I thought this was more or less what one should expect after weeks of stocks being closed in a country which is indeed in deep recession," he said.

The political outlook appears tenuous, with Syriza MP and former energy minister Panagiotis Lafazanis, urging his colleagues to join him in voting against the government when the bailout deal is brought to parliament.

"I personally will not vote for a new bailout that will continue to destroy the country and hurt its people," Lafazanis told Real FM radio. "Syriza lawmakers must fight to the last minute to stop the government signing a third bailout."

Greek Finance Minister Euclid Tsakalotos held fresh meetings on Tuesday with representatives from the European Commission, the European Central Bank and the International Monetary Fund over a third bailout for Greece.  

Greece faces a loan repayment on 20 August worth more than €3 billion to the ECB. To avoid defaulting on it, Greece would need money from the bailout programme it is negotiating or, short of that, an interim loan from its creditors.