Alexis Tsipras, leader of SYRIZA
Alexis Tsipras, leader of the far-left Syriza partyReuters

Greece's Prime Minister Antonis Samaras has dissolved the country's parliament ahead of snap elections to be held on 25 January.

The early polls were called by law after parliament failed to choose the government's candidate for president, Stavros Dimas, after three rounds of voting.

Samaras said parliament "is being dissolved prematurely" and the upcoming elections were "not wanted by the Greek people, they were not required and they are happening due to self-interest."

The new parliament will reconvene on 5 February to elect a successor of 85-year-old President Karolos Papoulias. "This struggle will determine whether Greece stays in Europe", Samaras said, sparking renewed fears of a potential Greek exit and panic among investors.

Athens stock market dropped by almost 5% in a single day and Greek 10-year bond yields climbed well above those for Italy to 9.5%.

The main reasons for worrying is that the election's frontrunner, the far-left populist Syriza party of Alexis Tsipras, wants to wipe out the national debt and cancel the austerity terms of a €240bn (£188bn) bailout from the EU and the IMF. Syriza, which also points to reversing cuts in the minimum wage and public spending, has led opinion polls for months, ahead of the ruling New Democracy party of the outgoing PM Samaras.

In a country where unemployment is still record high at 26% and growth stagnates, Syriza is playing on a recovering economy to get populist support and unwind reforms imposed by the Troika (IMF, EU and European central bank).

However, two polls published after Samaras' call to parliamentary election shows that Syriza's lead has shrunk, meaning that no party is likely to win outright in the January elections.

According to a poll by Marc for Alpha TV, Syriza would get 28.1% compared to 25.1% for New Democracy. A third of the respondents said they would opt for a New Democracy-led coalition rather than one led by Tsipras.