Greek Drama Not Over Yet: What May Happen Next / By: Reuters / ICH

Greek Drama Not Over Yet: What May Happen Next

Published: Friday, 4 Nov 2011 | 1:22 PM ET

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By: Reuters

Whatever the outcome of Greece's confidence vote on Friday, political instability will almost certainly keep markets guessing whether Athens will be able to ratify a 130 billion euro bailout deal in time to avoid a messy default in December.

Milos Bicanski | Getty Images Demonstrators shout slogans during a protest against plans for  new austerity measures on October 19, 2011 in Athens, Greece.

Greece has to pay nearly 3 billion euros in bonds maturing in December with big bills falling due from Dec. 19 onwards.

Finance Minister Evengelos Venizelos told parliament on Thursday the state can meet its obligations until December 15.

Greece must pay 1.172 billion euros on a 3-year bond due Dec.19, 978 million euros on a zero-coupon bond due Dec. 22 and 714 million euros for one-year paper maturing Dec. 30.

Prime Minister George Papandreou is likely to step down whether he wins or loses Friday's vote after his call for a referendum on the country's bailout lifeline triggered a revolt within his party and prompted anger from European leaders. The referendum plan has since been called off.

Here are some scenarios on how the drama in Athens might play out in the coming weeks:

Papandreou Wins, Sets Coalition Talks

The most likely scenario is that of Papandreou's party — angered by his shortlived plan to put the bailout to a referendum — backing him in the confidence vote on the understanding he makes a face-saving exit later.

Government sources have said Papandreou had struck a deal at a cabinet meeting on Thursday under which he would stand down after he had negotiated a coalition agreement with the conservative opposition, provided he survives Friday's vote.

Some of his own supporters have hinted at this, saying they will back him at Friday's vote as long as he begins  talks with the opposition on a cross-party coalition government that can ratify the euro zone rescue plan and then resigns.

Several lawmakers in the ruling Pasok party have already said they are in favor of such a "national unity" government and Papandreou himself has said he is willing to begin talks with the New Democracy opposition party on the issue.

Former European Central Bank Vice President Lucas Papedemos has been cited as a potential candidate to lead such an interim government of technocrats.

One potential sticking point between the two sides is on how long a coalition government will be in charge.

New Democracy leader Antonis Samaras wants a transitional government that ratifies the bailout and proceeds immediately to elections — in as little as six weeks — while a Pasok party official has suggested holding elections in March.

If those talks fail, the ensuing chaos would mean the country heads to snap elections sooner or later.

Papandreou Loses, Snap Elections Called

If Papandreou loses Friday's vote and an attempt to patch together an interim government fails, parliament would be dissolved and Greece would be forced to head to early elections — a potential doomsday scenario that puts the country at risk of not getting its bailout money in time.

Aris Messinis | AFP | Getty Images

Elections can be held in as little as 30 days, but polls show a vote held right now may not deliver an outright winner.

The New Democracy conservatives, who have widened their lead over the Pasok Socialists in recent months, are expected to win the largest share of votes but are unlikely to bag the 151 seats in parliament needed to form a new government.

The party may try to strike an alliance with the far-right Laos party or even Pasok to form a government, prolonging uncertainty in the markets about Greece's future. But if it gets close enough to a majority, it may hold out and demand a repeat vote that would allow it to rule alone.

Austerity-hit voters would then head again to the polls amid a vitriolic political climate where politicians warn of dire consequences if the vote fails to produce an outright winner.

The big question would be whether increasingly exasperated foreign lenders will approve an 8 billion euros aid  payment that was due this month in the hope a new parliament will immediately ratify the bailout package struck last week.

Papandreou Loses, Parliament Maintained To Ratify Deal

If he loses the late-night Friday vote, Papandreou would be forced to step down immediately but this would not automatically mean the parliament is dissolved and elections are held.

Given debt-choked Greece risks running out of cash in just over a month, party leaders could try to forge a deal to set up a transitional government with the aim of getting the EU bailout ratified by parliament before any elections are held.

Such a move would be unprecedented in Greek politics, but could be a last-ditch option the parties explore in a bid to avoid a messy bankruptcy and potential exit from the euro zone.

In such a scenario, the president would be obliged to give each political party three days to find allies to form a new government, meaning the process could last up to two weeks.

If this fails, then parliament is dissolved and elections are held within 30 days under a caretaker government appointed by the president.