By Angeliki Koutantou and Karolina Tagaris
ATHENS (Reuters) - Greek Prime Minister Kyriakos Mitsotakis declined to seek a coalition on Monday following this weekend's inconclusive election, paving the way for a second vote in June that he hopes his conservative party will win outright.
New Democracy won 40.8% of the vote versus 20.1% for the leftist Syriza, in a stunning boost for Mitsotakis, who has had to navigate a wiretapping scandal, the COVID pandemic, a cost of living crisis and a deadly rail crash that enraged the public.
But it fell short of the number of seats needed to govern on its own, triggering a round of coalition talks among the three biggest parties.
Nonetheless, markets surged on the prospects of a New Democracy victory in the second vote.
It would take place under a system of semi-proportional representation, with a sliding scale seat bonus, increasing the chances of an outright win for Mitsotakis's party. All parties are eligible to run again.
"Mitsotakis has no incentive to seek a coalition government ... as the bonus seats allocated in the second election make a New Democracy victory almost sure," said Lorenzo Codogno, head of LC Macro Advisors.
While each party, including the Socialist PASOK, are due to receive the three-day mandate to try to form a coalition, none have enough seats to form a ruling alliance, and all party leaders have indicated they will not hold exploratory talks.
This would pave the way for the appointment of a caretaker government to take the country to a new vote as early as June 25.
"I believe that the country needs a strong and stable government today, with a four-year term prospect," Mitsotakis told President Katerina Sakellaropoulou after she formally offered him the opportunity to form a coalition.
"The sooner this issue is closed, the better it will be for the country," he said.
Mitsotakis phoned the leaders of the four other parties that made it into parliament, reiterating that a government cannot be formed under the current circumstances, his office said.
Former prime minister and Syriza leader Alexis Tsipras was due to meet the president on Tuesday.
Greek shares jumped on Monday and banks outperformed, gaining nearly 15%.
Greek bond prices also outperformed their peers on Monday as investors reckoned the outcome of the election was unlikely to lead to a deviation from the current fiscal discipline.
Both Syriza and PASOK have indicated they will now shift their focus onto the next election.
PASOK spokesperson Dimitris Mantzos told state broadcaster ERT there was "no scope for convergences or collaboration".
In a televised statement, Tsipras called on voters to "prevent the prospect of an uncontrollable ruling prime minister", in the next election battle.
Once each party has returned or exhausted their three-day mandate to attempt to form a coalition, the president can then appoint a caretaker government, expected to be sworn-in by early next week, leading to a new election date.
(Additional reporting by Lefteris Papadimas; Writing by Karolina Tagaris; Editing by Alison Williams)