December 11, 2014 / 12:33 PM / 3 years ago

Greek PM warns of return to fear of 'Grexit' if government falls

ATHENS (Reuters) - Greek Prime Minister Antonis Samaras on Thursday warned the country risked a “catastrophic” return to the depths of its debt crisis if his government fell, raising the stakes before a presidential vote this month.

Greece's Prime Minister Antonis Samaras delivers a speech during an event of the Hellenic Confederation of Commerce and Enterpreneurship in Athens December 10, 2014. REUTERS/Alkis Konstantinidis

Greek stock and bond losses accelerated after the comments by Samaras, who is stepping up rhetoric against his archrival -- the anti-bailout Syriza party -- in a bid to win the backing of lawmakers in the presidential vote and avoid early elections.

“We shed blood to take the word `Grexit’ away from the mouth of foreigners, and Syriza is bringing this word back to their mouths,” Samaras said in a speech to party lawmakers. “All lawmakers must now decide if we will elect a president or go to snap elections that people don’t want, the markets are afraid of and which might have catastrophic consequences for the country.”

Failure to elect a president triggers early elections, which opinion polls show Syriza is likely to win. Samaras this week brought the presidential vote forward by two months -- leaving a final bailout review and plans for an exit from the program up in the air while he seeks parliamentary backing.

Syriza said Samaras’s speech was a sign the government -- who controls 155 lawmakers -- knows he cannot muster the 180 votes needed to win the presidential vote.

“He does not even hesitate to beg markets to attack the country,” Syriza said in a statement. “He is fooled if he thinks that by rekindling the same old issue of a euro exit he can terrorize people who have been asphyxiated by the bailout.”

The decision to bring forward the vote is a risky move. It forces independent and small-party lawmakers to decide whether to back Samaras’s politically tricky plan to pull the country out of the woods or the uncertainty of snap elections that would push the country deeper into crisis.

Investors have already been shaken by the sudden return to political upheaval in Greece. Greek shares fell 7 percent on Thursday, tumbling 21 percent so far this week.

The country’s borrowing costs have also inverted sharply in recent days, with 10-year yields shooting back up over an unsustainable level of 9 percent.

The vote to elect a president will be held in three rounds starting Dec. 17 and end on Dec. 29. Snap national elections will be held in January if the government loses, Samaras said.

“We will all be judged in the coming days,” Samaras said. “People do not want elections.”

If the government prevails, Samaras promised Athens would quickly move to complete a pending bailout review, seek debt relief and sign a precautionary credit line with lenders to support the country in an interim post-bailout period.

In Washington, the IMF confirmed that Greece expects to use the remaining funds due from the IMF as a precautionary credit line to be tapped if needed.

Greece’s funding needs were covered until the end of February, Samaras said, after Athens raised an additional 1.6 billion euros in a Treasury bill auction on Wednesday.

Additional reporting by Lefteris Papadimas and Angeliki Koutantou, Writing by Deepa Babington; Editing by Angus MacSwan, Larry King

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