RPT-INSIGHT-Greek premier prepared European ground before vote gamble

Thu Dec 18, 2014 2:08am EST

* Early presidential vote surprised Greek establishment

* But Samaras discussed plans with Berlin, Brussels

* Government candidate falls short in first round

* Previous premier caused uproar with referendum plan

By Renee Maltezou and Lefteris Papadimas

ATHENS, Dec 17 (Reuters) - Prime Minister Antonis Samaras has bet on Greece's future with an early vote for the presidency. But in contrast to a recent predecessor, he made sure before dropping the bombshell that Berlin and Brussels wouldn't stand in the way.

Samaras's decision last week to bring the three-stage parliamentary vote forward to this month from February took the Greek establishment and financial markets by surprise.

But a select few knew it was coming, among them German Finance Minister Wolfgang Schaeuble. With Berlin playing a decisive role in European aid for Greece, Samaras and Schaeuble spoke repeatedly by telephone in the days before the early vote was announced on Dec. 8, according to a euro zone official with direct knowledge of the talks.

They discussed details of Greece's international bailout, which Samaras wants to pull out of a year ahead of schedule. They also talked about bringing forward the vote, this person said, even though the conservative premier has yet to secure a majority of lawmakers for the government's candidate.

In the first round on Wednesday, the government candidate fell well short of the required majority. Further rounds are scheduled for Dec. 23 and 29.

The role of the Greek president is largely ceremonial but if parliament fails to elect a head of state, early national elections must be called. Opinion polls suggest the left-wing anti-bailout Syriza party would win.

With Greece's economic recovery still fragile, political uncertainty could rattle investors' confidence as it tries to leave the painful European Union/IMF bailout. Samaras is betting that the fear of upheaval will win over opposition lawmakers.

Berlin implicitly backed the decision for an early vote. "Schaeuble did not push Samaras in this direction. Now that it's been announced, Schaeuble believes this was not a bad choice by Samaras," said the official who spoke on condition on anonymity.

Samaras's tactic of making a bet to save his government and career, while not alienating euro zone colleagues, reflects Greece's still precarious position within the currency bloc.

Greece is close to regaining lost sovereignty by ending the bailout that imposed crippling austerity measures. But after its economic implosion five years ago, investors are still not sure Athens can go it alone. Support from Brussels and Berlin, even if only tacit, is still an important guarantee.

LEARNING THE HARD WAY

Greece learned that lesson the hard way. In 2011, then-Prime Minister George Papandreou astonished and infuriated European allies by announcing out of the blue a plan to hold a national referendum on whether Greece would accept the bailout.

Amid the uproar, Papandreou dropped the idea but it still helped to drag Europe into a fresh bout of market turmoil.

This time around, Greek officials were more careful.

For several months, Greece has been undergoing a final inspection by international creditors who have lent it 240 billion euros ($300 billion) since 2010. The talks have included the details of how Athens would exit the bailout programme. This was originally planned for early 2016, but Samaras wanted to push that forward to end of this year.

The talks got stuck on various points, including the need for more budget-trimming. Samaras and deputy premier Evangelos Venizelos realised they could not wrap up the inspection unless the outcome of the presidential vote was clear, say Greek officials with knowledge of the talks.

The government candidate, former European Commissioner Stavros Dimas, needs the votes of 180 lawmakers in the 300-seat parliament to be elected, but on Wednesday got only 160.

ROLLING BACK ON COMMITMENTS

Failure would force parliamentary elections resulting possibly in a Syriza-led government that could roll back any commitments made by Samaras to end the bailout.

Venizelos, in particular, was keen to abandon the official timeline, one Greek official said. In the week before the announcement, Athens felt the review was being held "hostage" to political uncertainty, leading to demands such as a lowering of the minimum pension, another Greek government official said.

That held up the review and the year-end bailout exit, and meant Samaras would not arrive at the previously-scheduled February presidential vote with the political victory of having pulled Greece out of the unpopular programme.

"As long as there was no visibility for this country, the lenders would not conclude the review," Public Administration Minister Kyriakos Mitsotakis said last week.

Moreover, the IMF and EU were seeking new measures to balance next year's budget. Asking lawmakers to vote on austerity and then go to a presidential vote would have been political suicide for Samaras, Greek officials said.

Proponents of a December vote argued this would present lawmakers with a choice: choose the government and effectively allow Samaras to complete the bailout exit, or have snap elections. The Greek official said this offered the best shot of winning over enough lawmakers from a pool of 24 unaligned lawmakers and another 22 from two small parties - some of whom would be likely to lose their seats.

On Dec. 7, Samaras made up his mind after euro zone ministers agreed to extend the bailout to the end of February.

Now he secured European cover. Following the Schaeuble contacts, Samaras discussed an early vote with other leaders, including European Commission President Jean-Claude Juncker, according to one official.

The next day, a rainy Monday, Venizelos and Samaras finalised their plan. A Greek government spokeswoman declined to comment on Samaras's conversations but said the decision was made because "the review with lenders could not be concluded". ($1 = 0.8059 euros) (Writing by Deepa Babington; Editing by Alessandra Galloni and David Stamp)