A coalition of leftist parties in Greece is trying to form a cabinet that will reject the austerity measures imposed by the country's creditors - the EU and the International Monetary Fund (IMF).
The move comes after Antonis Samaras, the Greek conservative leader whose party won the most seats in Sunday's election, failed to form a governing coalition.
Analysts say that if an anti-bailout coalition is formed and proceeds to reject the agreed austerity measures, it would jeopardise the country's ability to pay its bills and wages.
"The Greek people remain dissatisfied with the current approach. Ultimately this means Europe will need to give more time for Greece to form a government but time means money … will Europe be willing to give more?"
- Vagelis Agapitos, an independent economist
The rest of the eurozone and the IMF would then have to decide if the bailout would continue. If not, Greece could leave the eurozone.
The Greek government debt crisis began in 2009, and since then the eurozone countries and the IMF have agreed on several bailout loans for Greece - all conditional on the implementation of harsh austerity conditions.
The latest austerity package approved in February in return for a $170bn bailout includes: 150,000 jobs cut from the state sector by 2015, of which 15,000 should be cut by the end of the year; lowering the minimum wage by 20 per cent from $978 a month to $781; pension cuts worth $390m in 2012; liberalisation of labour laws; and privatisations worth $19.5bn by 2015, including Greek gas companies.
These measures pushed Greece into a deep recession, causing the economy to shrink by almost 12 per cent between 2009 and 2011, and it is expected to shrink again in 2012.
With high unemployment, businesses closing, credit scarce and proposed new wage cuts expected to further decimate the shrinking middle class, the hard-left and extreme-right are rising forces.
"This is a political crisis and that will have much bigger implications for business in Europe, and for jobs and growth."
- Reinhard Luken, the secretary-general of the Community of European Shipyards Associations
Alexis Tsipras, the leader of Greece's far-left who insists he is going to put together a cabinet that will reject austerity measures imposed as part of the EU deal, said: "We are sure that the Greek people will send a strong message to all of Europe for a change of course. There is no room for the barbaric bailout agreement in our European course."
That puts Tsipras on a collision course with German Chancellor Angela Merkel, who said it is important that Greece continues to reform: "Of course the most important thing is that the programmes we agreed on with Greece are continued, that the path Greece has chosen is continued, though it was troublesome and difficult. Now it's time for Greece itself to see what outcome results from the election for new government."
Merkel has also stressed that this week's elections in both France and Greece did not mean that the terms of the EU's response to the sovereign debt crisis were up for renegotiation.
"The EU fiscal pact is not negotiable," she said. "It has been negotiated and has been signed by 25 countries, it has been ratified by Greece and Portugal, and in Ireland there will be a referendum on May 31. And I think that the fiscal pact is right."
So, will Greece remain in the eurozone or become the first country to exit it? What is the country's future under a rising tide of fringe far-left and far-right politics?
Joining Inside Story to discuss these issues with presenter Stephen Cole are guests: Vagelis Agapitos, an independent economist; George Tzogopoulos, a research fellow and website editor at the Hellenic Foundation for European and Foreign Policy; and Reinhard Luken, the secretary-general of the Community of European Shipyards Associations, which represents the industry in 17 member states.
"There is not only a deadlock in terms of the economy but also political stability, and the future is at stake, especially the European orientation of our country."
George Tzogopoulos, a research fellow at the Hellenic Foundation for European and Foreign Policy
EUROZONE 'CONVERGENCE CRITERIA' FOR MEMBERSHIP:
Eurozone member states must fulfill certain economic and legal conditions known as the 'convergence criteria' in order to gain membership. This involves amending national laws and rules to ensure compatibility with the treaty. The criteria set by EU members are:
- Price stability - to show inflation is controlled
- Sustainability of public finances - to avoid excessive deficit
- Stable exchange-rate - to show if a member state can manage its economy without recourse to excessive currency fluctuations
- Long-term interest rates