Greek leaders to pick premier for new government

Associated Press
Greece's Prime Minister George Papandreou waves to journalists while exiting the Presidential Palace after a meeting with Greek President Karolos Papoulias and opposition leader Antonis Samaras, in Athens Sunday, Nov. 6 2011. Greece's embattled prime minister and the head of the main opposition party reached an initial agreement to form an interim government that will ensure the country's new European debt deal and then lead Greece to early elections, the president's office said. (AP Photo/Kostas Tsironis)
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ATHENS, Greece (AP) — The leaders of Greece's two biggest political parties were in talks Monday to choose the head of a new interim government, after reaching a historic power-sharing deal to accept a massive financial rescue package and prevent imminent bankruptcy.

Socialist Prime Minister George Papandreou and conservative leader Antonis Samaras held fresh negotiations on the telephone to hammer out the composition of the new 15-week government. The new administration will be tasked with passing the euro130 billion ($179 billion) package — agreed by international creditors on Oct. 27 — before elections.

Fellow European governments will want concrete progress by the evening, when eurozone finance ministers meet to discuss the crisis. Beyond Greece, investors are becoming increasingly concerned about Italy, where Premier Silvio Berlusconi is under pressure to resign.

The eurozone ministers will not discuss unfreezing Greece's bailout loans that had been kept on hold while the country sorted its political turmoil, according to a European official, who spoke on condition of anonymity. Paying out those loans will depend on the Greelk government approving the rescue package agreed on Oct. 27, the official said.

"Things are headed in the right direction. Today, the national unity seems to be forming in Greece, which is a positive development," said French Foreign Minister Alain Juppe. "But what's important is that the bailout plan for Greece gets ratified."

Former European Central Bank vice president Lucas Papademos is being tipped as the most likely new head of the Greek government that would serve until a Feb. 19 general election.

Officials in Greece's two main political parties have confirmed the 64-year-old former central banker is a candidate though there's no indication yet he would want the job.

Finance chief Evangelos Venizelos, who had earlier been tipped as a possible candidate, was already in Brussels for the eurozone ministers' talks.

None of the people being considered have been announced publicly.

The power-sharing talks were due to be concluded by the end of the day, with former EU Environment Commissioner Stavros Dimas, a conservative, also being considered for a senior government position, according to two conservative officials with knowledge of the talks who spoke to the AP. The officials asked not to be named, citing the sensitivity of the negotiations.

Papandreou and Samaras agreed on the interim coalition late Sunday under mounting international pressure for cross-party acceptance of the deal following a week of turmoil in the markets as investors fretted over a disorderly Greek default and the country's possible exit from the euro.

As part of the deal, Papandreou agreed to step down halfway through his four-year term. Elected after a landslide victory a little over two years ago, Papandreou's stock took a big battering last week after his call for a referendum on Greece's latest rescue package, that was agreed less than two weeks ago.

Though the referendum pledge was pulled after Greece's main conservative opposition said it agreed to the broad outlines of the rescue deal, markets remain in a jittery state, especially as the country needs the next batch of bailout cash within weeks to pay off debts.

"There are cool-headed people in both parties," Justice Minister Miltiadis Papaioannou told private Antenna television. "This was not a card game; it was about keeping the country on its feet."

Senior conservative officials conceded they had come under strong pressure from European Union officials before withdrawing their demand for an immediate general election.

European markets were broadly lower Monday, though a Greek banking rally saw shares on the Athens Stock Exchange buck the trend, up 1.1 percent at 758.92.

"What is clear is that the European partners are becoming more and more intransigent with Greece and they will want evidence of concrete advances on Monday evening," said Silvio Peruzzo, an analyst at Royal Bank of Scotland.

Papandreou spoke by telephone Monday with top EU officials and German Chancellor Angela Merkel to discuss the impending power hand-over and thanked her for their "close and good cooperation over recent months," according to a spokesman from Merkel's office.

"For us, what counts is the economic and financial policy of a Greek government, and ... we are counting on the incoming transitional government getting to work quickly on implementing, and implementing fully, the decisions from Brussels," spokesman Steffen Seibert said.

"Europe, and the German government too, must be able to see that the Greeks are serious, that it is not just about announcements but about actions."

Frustrated with Greece's political disagreements, the country's creditors have threatened to withhold the next critical euro8 billion ($11 billion) loan installment until the new debt deal is formally approved in Greece.

Greece is surviving on a euro110 billion ($150 billion) rescue-loan program from eurozone partners and the International Monetary Fund. The new government's main task is to push through the second euro130 billion deal, that involves private creditors agreeing to cancel 50 percent of their Greek debt.

Punishing austerity imposed in exchange for the rescue loans brought Papandreou's government to its knees. Its efforts to keep the country solvent have prompted violent protests, crippling strikes and a sharp decline in living standards for most Greeks.

"I don't expect anything," Athens resident Stavros Stournaras said of the new political agreement. "When people truly go hungry and there's an uprising, then things will change."

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Kantouris reported from Thessaloniki, Greece. Geir Moulson in Berlin, Pierre-Yves Roger in Paris, Gabriele Steinhauser in Brussels, and Theodora Tongas in Athens also contributed.

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