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News Wrap: Greece Tries Again to Form New Government, Fears of Euro Exit Grow

May 14, 2012 at 12:00 AM EST
In other news Monday, rival party leaders in Greece began a last-ditch effort to form a new government while European leaders faced the growing possibility that Greece's days in the eurozone might be numbered if it rejects austerity measures. Also, plans to close some 600 U.S. post offices have officially been put on hold.
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HARI SREENIVASAN: Rival party leaders in Greece began a last-ditch effort today to form a new government. And European leaders faced the growing possibility that Greece’s days in the Eurozone might be numbered if it rejects austerity measures.

We have a report from Martin Geissler of Independent Television News.

MARTIN GEISSLER: Europe’s finance ministers are meeting in Brussels this evening, short on time and short on options.

“I haven’t ruled out the possibility of giving the Greeks more time,” said the German finance minister today. “But we have been helping them for two years now, and we’re still no closer to resolving the problem.”

The markets share that concern. Prices slumped across the continent and beyond. And the coming days are seen as pivotal. French President Francois Hollande will fly to a meeting with German Chancellor Merkel tomorrow, straight from his inauguration. He wants to soften her hard line on austerity, but analysts can’t see that happening.

GUNTRAM WOLFF, financial analyst: You either stick to the terms or you’re out. That’s — you have to be very tough on the negotiations from the German side at the moment, because if you’re not, you send these messages to everybody else, saying, look, you just vote for other parties and you get better bailout terms.

MARTIN GEISSLER: But this is uncharted territory. It’s not clear Europe could kick Greece out of the euro even if it wanted to.

Under European law, it’s practically impossible for a country to be expelled from the euro. They have to ask to leave, and the Greeks don’t want to do that. Theoretically, if they default on their debt, Brussels could turn off the life support machine, cut all funding to the country until it begs to be released. But that wouldn’t be an easy or a popular decision to take.

There’s a glimmer of hope that a last-minute deal may be struck to form a coalition government that could help the country limp along for a few months at least. But it’s a long-term strategy that Greece and Europe need. And, tonight, that looks more distant than ever.

HARI SREENIVASAN: The stalemate in Greece had Wall Street worried today. The Dow Jones industrial average lost 125 points to close at 12,695. The Nasdaq fell 31 points to close at 2,902.

Plans to close some 600 post offices have officially been put on hold. Until today’s decision, the urban and suburban sites had been on a closing list as part of the Postal Service’s bid to cut costs. The announcement follows last week’s announcement that hundreds of rural post offices would be spared as well. Instead, they will operate on shorter hours.

California’s fiscal problems have grown even more severe. Gov. Jerry Brown announced Sunday that the state budget deficit will run nearly $16 billion next year, up sharply from the last estimate. Today, Brown proposed a long list of cuts, including a 5 percent pay cut for state employees. He is also asking voters to approve increases in sales and income taxes.

GOV. JERRY BROWN, D-Calif.: California has been living beyond its means. The United States of America and its federal government is living beyond its means. A lot of corporations have. A lot of people spend more than they take in. Well, there has to be a balance and a day of reckoning. This is a type of day of reckoning. And we have got to take the medicine.

HARI SREENIVASAN: If voters reject the tax hikes, Brown said he will propose automatic reductions in spending for public schools and the university systems.

In Afghanistan, hundreds of people turned out today to mourn a former Taliban leader who became a peace negotiator. He was shot to death on Sunday. The honor guard escorted the body of Arsala Rahmani to the burial. He had reconciled with the government and was active in coordinating talks with Afghan insurgents. The Taliban has publicly threatened peace negotiators, but it denied responsibility for the Rahmani assassination.

Hundreds of Palestinian prisoners in Israeli jails have agreed to give up a hunger strike they began a month ago. Word of a deal came today, mediated by Egyptian officials. The prisoners won concessions, including more visits from family members and an end to holding prisoners indefinitely without trial. In return, the Israelis said militant groups have pledged to halt violent activities.

The last holdout in the Republican presidential race, Texas Congressman Ron Paul, effectively ended his campaign today. He said he will not be spending any more money.

In a statement, Paul said, “Doing so with any hope of success would take many tens of millions of dollars we simply do not have.” The congressman is not expected to endorse Mitt Romney, the party’s presumptive nominee.

Those are some of the day’s major stories.