Greece's government has been forced to call early national elections, leaving markets trembling at the prospect of a victim for the anti-austerity Syriza party, which is set on drastically overhauling the country's bailout agreement and ending punishing spending cuts.
The left-wing opposition party, which has a narrow but steady lead in opinion polls, has promised to act decisively on popular resentment for six years of government austerity.
Syriza has pledged to roll back some of the reforms Greece implemented to qualify for 240 billion euros in rescue funds. But it has recently softened its rhetoric about unilaterally pulling out of the bailout deal.
Alexis Tsipras, the leader of SYRIZA
Leader Alexis Tsipras said Monday's vote marked a "historic day for Greek democracy."
"When the majority of the people is determined to end the policies of the bailout agreements and austerity, then lawmakers can do no else than respond to their duty to keep in line with the will of the people," he said.
"Today [Conservative Prime Minister Antonis] Samaras' government, which for two and a half years plundered our society and had already decided and committed to take new measures, belongs to the past," Tsipras added. "With the will of our people, in a few days, the austerity agreements will also belong to the past."
Samaras said national elections, the fourth in six fraught years of financial crisis, will be held "at the soonest possible date" — Sunday, January 25, 18 months early.
"The country has no time to waste," Samaras said in a televised address just after the presidential vote. "We came very close to the final exit from the crisis ... The people must learn the truth about how easy it is to relapse into the deepest and most dramatic crisis."
The stock market tumbled 11.3% before recouping some of its losses on news of the election, which will be held Jan. 25 and was triggered by parliament's failure to elect a new president. European markets also fell, with the Euro Stoxx index down 0.9%.
At the height of the eurozone crisis in 2010 and 2011, Greece's financial turmoil risked breaking up the currency union, an event which would have shaken the global economy.
The risks today are not as great, analysts say, as little of Greece's debt is held by private investors, but mainly its bailout creditors — other European countries and the International Monetary Fund.
However, should a new government seek changes to the deal, Greece's access to credit would be delayed just as its bailout loans are coming to an end. Greece still cannot finance itself independently on bond markets, so it faces the danger of a default that could hurt the finances of fellow European countries.
In the presidential vote, his coalition's candidate for the post, 73-year-old former European commissioner Stavros Dimas, garnered 168 out of 300 possible votes— short of the 180 needed to win. It was the third and final round of voting. According to the constitution, the vote's failure means parliament has to be dissolved within 10 days.
Greece lost market confidence and nearly went bankrupt in 2010, after years of profligate spending, dodging public sector reforms and hiding the extent of its bloated public deficit and debt.
The EU-IMF bailouts kept the country afloat, but drastic belt-tightening demanded by creditors hammered incomes and living conditions, sending unemployment to a post-World War II high. Ensuing resentment fuelled support for anti-austerity parties, from Syriza — whose pre-crisis support was under 5% — to the neo-Nazi Golden Dawn.
Samaras presided over a historic coalition that united his conservative party with their historic socialist rivals to hammer out further draconian spending cuts that balanced the budget after decades and led to a modest economic recovery this year.