Another election looms as Greek leaders struggle to forge coalition

Last-ditch talks to be held today nearly a week after electorate rejected austerity measures

Rudderless Greece was still seeking a government yesterday nearly a week after voters rejected the austerity measures demanded in return for an international bailout.

While analysts and allies have warned Athens that its future in the eurozone is hanging in the balance, its politicians have been unable to agree a coalition and a fresh election seems the most likely outcome.

A day that began with the headline "A ray of hope" in the popular daily Ta Nea ended with socialist Pasok, the third party to attempt to form a unity government this week, also unable to find partners. The hope had been that the moderate Democratic Left might join Pasok and its erstwhile coalition partner New Democracy to cobble together the necessary majority.

However, the Democratic Left leader, Fotis Kouvelis, ruled out a three-way alliance and said that a government without the Radical Left Coalition, Syriza, who came a surprise second last Sunday was a non-starter.

Greece's main parties, Pasok and New Democracy, were punished at the ballot box for their role in leading the country into the financial crisis and their co-operation with international creditors' demands for cuts and reforms. Greece is in its fifth year of recession with unemployment of nearly 22 percent.

Greek leaders have come under enormous pressure from European partners and international creditors determined that it should stick to the terms of its €130bn second bailout. While talks have dragged on, major banks have issued a stream of reports discussing ways in which the eurozone could weather a Greek exit – now being labelled a "Grexit".

Anti-bailout Syriza may have the most to gain from fresh elections, expected on 17 June, and opinion polls have shown it could build on its 17 per cent showing last week to take more than one quarter of the vote. Under Greek law the leading party gets a bonus of 50 MPs in Greece's 300-seat parliament which gives the increasingly popular young Syriza leader Alexis Tsipras little reason to deal with the tainted forces who have supported the bailout.

"If Syriza does not change its stance we will head to elections," said Mr Kouvelis. "We didn't want these elections, we did everything we could and even more to avoid them. But if there are elections, we are ready to fight."

Mr Kouvelis, who says he supports a gradual withdrawal from the "memorandum" agreement with the Troika – the International Monetary Fund, the EU and the European Central Bank – rather than an immediate reneging on loan agreements, faces a tough dilemma.

The last party to enter a coalition in support of austerity measures were the anti-immigrant nationalists of Laos whose support subsequently dropped beneath the three-point threshold for entering parliament.

Some two-thirds of Greeks voted for parties either opposed to the memorandum or intent on renegotiating it fuelling a widespread feeling that the embattled country is leading a democratic fightback against the austerity demanded by stronger European economies such as Germany to meet the debt crisis.

Should the latest round of power-sharing talks today fail, then Greece's president Karolos Papoulias will call together party leaders for one final attempt at making a government. If they can't reach an agreement, Greece would then need an interim administration to see it through to a fresh vote.