Greece election: Coalition 'could be formed Wednesday'

Pasok leader Evangelos Venizelos (right) shakes hands with his Democratic Left counterpart, Fotis Kouvelis
Image caption Pasok leader Evangelos Venizelos (R) was optimistic after meeting Fotis Kouvelis of the Democratic Left

A new government for Greece could be formed by midday (09:00 GMT) on Wednesday, Pasok (Socialist) leader Evangelos Venizelos has said.

He spoke after Pasok and two other parties held talks on forming a coalition amid intense pressure from world powers and financial markets.

New Democracy, the conservative winner of Sunday's election, is expected to lead the new government.

It is unclear if Pasok will actually join or will offer support instead.

The third party is Democratic Left. Between them, the three parties would have a majority of 29 seats in parliament.

They all favour keeping Greece in the euro while wanting to renegotiate terms of its EU/IMF bailouts.

However, European leaders have indicated that there is limited room for manoeuvre and are expecting details on how the new government intends to make another 11.7bn euros (£9.4bn; $14.7bn) of cuts by 2014.

New Democracy won 129 seats in Greece's 300-seat parliament on Sunday, followed by the radical anti-bailout party, Syriza, with 71, Pasok with 33 and the Democratic Left with 17.

'Outstanding issues'

After Tuesday's talks in parliament, Mr Venizelos said: "A government must be formed as soon as possible.

"As we stand now, it could be formed by midday tomorrow."

He said his party would support the government "wholeheartedly", but had not yet decided what form its participation would take.

Earlier on Tuesday, Mr Pasok held individual talks on joining a coalition government with his Democratic Left counterpart, Fotis Kouvelis.

Mr Kouvelis said the three parties would first have to agree on the coalition's policies and the division of cabinet posts.

"There are still some outstanding issues regarding the programme of the government and the terms [of the bailout] from which Greece must disengage," he added.

New Democracy leader Antonis Samaras's three-day mandate to form a government from President Karolos Papoulias expires on Wednesday. If it fails, Syriza would be given a chance, followed by Pasok.

Image caption Antonis Samaras's New Democracy won 129 seats in the 300-seat assembly

But the leader of Syriza, Alexis Tsipras, has said he will not even attempt to do so. He has also refused to join a government led by New Democracy.

'Huge hardships'

World powers have urged Greece to move swiftly to form a government.

On Monday, markets initially reacted positively to the election result, but that quickly waned.

All the parties in the election wanted a renegotiation of the bailout terms, but differed on the extent.

Mr Samaras said late on Monday: "We will simultaneously have to make some necessary amendments to the bailout agreement, in order to relieve the people of crippling unemployment and huge hardships."

A senior New Democracy official told Reuters news agency it would support a quickening of the government's privatisation programme, but that it would prefer the scheduled 11.7bn euros of austerity cuts to be spread over four years, not two.

Germany has indicated there will be few concessions on the terms.

German Chancellor Angela Merkel warned: "Elections cannot call into question the commitments Greece made. We cannot compromise on the reform steps we agreed."

However, the US said it might support a review of the terms.

US Treasury Under-secretary for International Affairs Lael Brainard said: "We can expect to see on the part of the European partners and the IMF recognition that Greece's programme has gone off track for some period of time, in part because they had a protracted political process and have not had a government."

Two international bailouts have been awarded to Greece, an initial package worth 110bn euros (£89bn; $138bn) in 2010, then a follow-up last year worth 130bn (£105bn; $164bn) euros, but they come with tough austerity measures attached.

Greece has also had 107bn euros (£86bn; $135bn) of debt, held by private investors, written off.

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