Papandreou-Samaras talks on new Greek government

Greek newspaper. Nov 7 2011
Image caption Greek politicians are under international pressure to resolve their differences

Greece's political leaders are still locked in debate over the formation of a unity government they hope can save the country from imminent bankruptcy.

PM George Papandreou is to stand down once the government is formed but his replacement has not yet been named.

The new leadership will be tasked with ratifying a vital EU bailout package.

Greece is under huge international pressure to resolve its political crisis, in order to calm the global markets and protect the eurozone.

An agreement on an interim leader had been expected on Monday but by Tuesday morning, there was still no announcement from the negotiations between Mr Papandreou and opposition leader Antonis Samaras, of the New Democracy party.

An emergency cabinet session chaired by Mr Papandreou on Tuesday ended still without an announcement.

"Today is the last chance for the two main parties," daily newspaper Nea wrote in an editorial on Tuesday.

"They have to come up with a government strong enough to take the country out of the moving sand of political impasse that leaves us defenceless, at the mercy of the crisis. Time is up."

"A national unity government, right now," the daily newspaper Ethnos wrote on its front page, adding: "The country and the society cannot endure any more."

Greece must approve the EU bailout if it is to avoid going bankrupt by the end of the year. But the deal demands stringent austerity measures and spending cuts which have proved hugely unpopular with many Greeks.

Mr Papandreou agreed to stand down on Sunday, after days of upheaval caused by his call - now revoked - for a referendum on accepting the bailout.

Since then, he had been trying to build a national unity government to replace his Pasok party administration. However, Mr Samaras was refusing to negotiate unless his rival resigned.

The first steps in forming the new government were finally announced after late-night talks on Sunday between the two men, hosted by President Karolos Papoulias.

A Greek government spokesman said a new administration would be sworn in and a confidence vote held within a week, if all went well.

Greece's new political roadmap envisages elections being held - possibly on 19 February - once the new government has approved an EU bailout package.

Government figures spent Monday locked in discussions on the framework of the interim authority and their roles within it.

Lucas Papademos, a former vice president of the European Central Bank (ECB), is widely seen as the frontrunner to become interim prime minister, while Finance Minister Evangelos Venizelos - for a time considered to be a candidate - is expected to remain at the finance ministry.

The BBC's Mark Lowen in Athens says it is believed Mr Papademos expressed doubts that an interim administration could be effective until proposed elections in February.

It appears he wants to stay in power longer if chosen, he adds.

Our correspondent says there will be immense pressure on whoever takes over, while European leaders will be hoping that person will work with them in trying to contain the country's debt crisis and prevent it from spreading further across the eurozone.

Eurozone finance ministers held talks in Brussels on Monday, adding to the pressure on Greece to find an early solution to the political deadlock.

Mr Venizelos also attended the talks, telling reporters that the move towards a unity government was "proof of our commitment and of our national capacity to implement the programme and to reconstruct our country".

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Media captionViews of the Greek people: "When there's an uprising, then things will change"

But eurozone finance ministers have asked for written assurances from Mr Papandreou and Mr Samaras that they are committed to passing the rescue package.

Eurozone chief Jean-Claude Juncker said he was "quite confident that now the situation in Greece is developing in the right direction" but that it "should have been done months ago".

The EU says no more of the funds which have been promised to Greece will be released until the new bailout deal has been approved.

Political crisis

The hard-fought bailout deal for Greece agreed by the EU last month gives the government 130bn euros (£111bn; $178bn) and imposes a 50% write-off on private holders of Greek debts, in return for deeply unpopular austerity measures.

But Mr Papandreou faced the wrath of fellow EU leaders when he announced that he would put the deal to the people of Greece in a referendum

The idea was dropped days later, but not without sparking a deeper financial crisis and triggering the political crisis which led to the confidence vote last Friday.

Mr Papandreou narrowly won that vote, but had been under continuing pressure to resign amid chaos over the debt crisis.

The possibility of Greece leaving the euro has also been raised by EU leaders, if Athens fails to resolve its political and financial problems.

There are fears that the crisis could spread to bigger eurozone countries like Italy.