Greece scrambles to form new coalition govt

November 7, 2011 8:31 am


Greek Prime Minister George Papandreou (L)/AFP
ATHENS, Nov 6 – Greek political chiefs were scrambling Monday to form a unity government and call early elections to try to stave off a massive debt crisis that threatens the stability of the eurozone.

The stricken nation will name a new leader and cabinet by the end of the day after talks between outgoing Prime Minister George Papandreou and conservative opposition leader Antonis Samaras, a government spokesman said.

The two main parties agreed on February 19 as the “most appropriate” date for early elections demanded by Samaras in exchange for his party’s backing of a huge European bailout plan to save the eurozone member from bankruptcy.

A historic power-sharing deal was reached in dramatic late-night talks on Sunday after socialist party leader Papandreou agreed to step down, removing a key stumbling block hours before jittery financial markets reopened.

News of the deal, which emerged after a week of political turbulence, briefly lifted the euro above $1.38 in early Asian trade Monday. But the single currency quickly lost steam to $1.3765, down from $1.3788 in New York late Friday.

Asian stock markets drifted lower in nervous trade, with Tokyo’s Nikkei index closing down 0.39 percent and Hong Kong 0.30 percent off in the afternoon.

“Finally. The first major step to save the country,” the pro-government daily Ta Nea said, hailing what it described as an “historic day”.

The two main political leaders “laid the foundation stones for a coalition government while the eyes of the entire world were trained on the country,” the paper said.

The Greek accord came ahead of a eurozone finance ministers’ meeting Monday over whether to release an eight billion euro ($11 billion) slice of bailout funds that the government says is needed by December 15 to keep the country afloat.

“An agreement was reached to form a new government to immediately lead the country to elections after ratifying the decisions taken by the European Council,” the Greek president’s office said in a statement, referring to the 100 billion euro EU bailout hammered out in October.

An earlier bid to include smaller parties in the coalition government negotiations foundered after Communists and the leftist Syriza party declined to attend proposed talks.

Avgi, the Syriza party newspaper, decried a “cooked-up deal to save the memorandum,” referring to a 2010 loan agreement between Greece and the EU, the International Monetary Fund and the European Central Bank requiring two years of tough austerity.

Senior economic officials from the government and the opposition conservatives were to hold follow-up talks on Monday ahead of the eurozone meeting in Brussels, the semi-state Athens News Agency said.

Among those tipped to take over as premier are Finance Minister Evangelos Venizelos, a former challenger for the socialist Pasok party leadership, and former European Central Bank vice-president Lucas Papademos.

European leaders have become increasingly frustrated at the political impasse in Athens at a time when they want to press ahead with hard-won agreements reached in late October on tackling the eurozone debt crisis.

Leaders of the world’s top 20 economic powers Friday pushed Europe into acting to stop Italy following Greece into a debt crisis, but the G20 summit failed to come up with new funds to boost the IMF war chest.

Despite the Greek accord, there will likely be no let-up in the pressure on Athens to implement stinging austerity measures in return for the cash payment, available under the first May 2010 Greek bailout package.

The new government will be tasked with implementing the bailout deal, which calls for further harsh austerity measures in Greece, already at breaking point with its economy shrinking and unemployment rising fast.

The latest turmoil began with Papandreou’s shock announcement a week ago that Greece would hold a referendum on the massive EU rescue deal which aims to slash the country’s debt by almost a third.

The move stunned fellow European leaders, sent global markets into a tailspin and earned the premier a humiliating dressing-down prior to a G20 summit in France. Papandreou hastily retracted the proposal and he narrowly won a confidence vote in parliament after pledging to work for a unity government.

Opinion polls published in Sunday newspapers showed Greeks largely in favour of a unity government and also wanting to keep the euro. But some Greeks appear to have had enough of their squabbling leaders.

“Papandreou. Samaras. They are all the same,” said Takis Karalambos, as he sipped a coffee outside a market in Athens.


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