The leaders of Greece’s two biggest parties are due to resume talks Monday to agree on who should be the country’s new prime minister, after reaching a historic power-sharing deal to push through a massive financial rescue deal and prevent imminent bankruptcy.
Europe’s markets and government, however, remained cautious that the power deal would resolve the country’s political turmoil and alleviate concerns over Greece’s membership of the euro.
Socialist Prime Minister George Papandreou and conservative leader Antonis Samaras are to hold fresh talks to hammer out the composition of the new 15-week government, which will be tasked with passing the €130 billion ($179 billion) package from the country’s international creditors before elections.
Former European Central Bank vice president Lucas Papademos is being tipped as the most likely new head of the government that would serve until a Feb. 19 general election.
Officials in Greece’s two main political parties have confirmed that the 64-year-old former central banker is a candidate though there’s no indication yet he would want the job, for however short a period.
None of the people being considered have been announced publicly.
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.”
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Senior conservative officials conceded they had come under strong pressure from European Union officials before withdrawing their demand for an immediate general election.”
All European markets have opened sharply lower Monday, though shares on the Athens Stock Exchange bucked the trend, trading 2 percent higher.
European governments also remained cautious as they awaited developments on the composition of Greece’s new government. Finance ministers from the 17 eurozone countries are due to meet later in Brussels, and will be awaiting an update from Greece’s Evangelos Venizelos.
“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.
Germany’s vice chancellor Philipp Roesler again warned Greece not to delay in pushing through reforms.
“The Greeks themselves have the choice: reforms in the eurozone or no reforms, and out. There is no third way,” he told the popular German daily Bild
Frustrated with Greece’s protracted political disagreements, the country’s creditors have threatened to withhold the next critical €8 billion ($11 billion) loan installment until the new debt deal is formally approved in Greece.
Greece is surviving on a €110 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 €130 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 for the new political agreement. “When people truly go hungry and there’s an uprising, then things will change.”