Greece’s government has conceded that dissent within the ruling party was likely to force an early election, while bank shares plummeted again on the stock market.
The left-wing government is relying on opposition party support for approval in parliament of new austerity measures demanded by bailout lenders, following a revolt by nearly one fourth of its own lawmakers.
Government spokeswoman Olga Gerovasili said the government would not form a national unity government and described early elections as “likely”.
“A solution will be found, since the country needs a strong government,” Ms Gerovasili said. “(Early) elections are likely but that doesn’t mean we will be dealing today with when they will take place.”
Amid the uncertainty, the main stock index lost another 1.2% on Tuesday, the second day the 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.
Greece’s economy is reeling from the impact of limits on money withdrawals and transfers that the government imposed on June 29 to avoid a collapse of the banking sector.
Uncertainty over Greece’s negotiations for a new bailout and over the stability of the government have heightened concerns.
European markets were unaffected by the Greek market nosedive, however, which Italian finance minister Pier Carlo Padoan described as “normal market behaviour 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 told reporters in Rome.
The political outlook appears tenuous, with Panagiotis Lafazanis, a prominent dissenter and lawmaker of the ruling Syriza party, urging 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,” Mr Lafazanis said. “Syriza lawmakers must fight to the last minute to stop the government signing a third bailout.”
Finance minister Euclid Tsakalotos was holding new meetings on Tuesday with bailout negotiators from the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF).
Ms Gerovasili said the government remained committed to concluding the talks by August 18 and that work on drawing up the text of a draft agreement would start this week.
Greece faces a loan repayment on August 20 worth more than 3 billion euro (£2.1 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.