Greek Leaders Forge Deal On Coalition Government

Greece’s Prime Minister George Papandreou and conservative opposition leader Antonis Samaras met on Sunday and agreed to a new coalition government that would vote on the euro zone rescue deal before new elections are called for.

The European Union gave Greece 24 hours to explain just how they would form a unity government that would enact the emergency rescue funding deal agreed to by European Union leaders in Brussels Belgium in October. The EU has made clear it wants a unity government in Greece to ensure consensus support for reform and restore confidence after a week that saw Papandreou first call for a referendum on the bailout and then backtrack under international pressure.

The office of Greece’s President Karolos Papoulias issued a statement after the meeting between Papandreou and Samaras. “Tomorrow there will be new communication between the prime minister and the opposition leader on who will be the leader of the new government,” the statement said. Papandreou “has already stated he will not lead the new government,” the statement from the president’s office said.

Papandreou is scheduled to meet with Samaras again on Monday to thrash out who will lead the new coalition.

An opposition conservative party official said Samaras’ party is “absolutely satisfied” with the outcome of the talks and that party officials were to hold meetings late Sunday night with Finance Minister Evangelos Venizelos and his advisers to discuss how long it would take to finalize the new debt deal and when elections could be held. “Our two targets, for Mr. Papandreou to resign and for elections to be held, have been met,” the official said, speaking on condition of anonymity to discuss the process.

Greece has been in survival mode since May 2010 on its initial bailout. Greece’s financial crisis is so severe that a second bailout is needed as the country remains locked out of international bond markets by sky-high interest rates. Greece also faces as unsustainable national debt. The Greek people have been enduring punishing austerity measures in an effort to avoid a default by the Greek government.

The new European Union rescue package, agreed to on October 27, would give Greece an additional euro130 billion ($179 billion) in rescue loans and bank support. It calls for banks to write off 50% of Greek debt, worth some euro100 billion ($138 billion). The goal is to reduce Greece’s debts to the point where the country is able to handle its finances without relying on further bailouts.

written by Rachel Brook

Rachel Brook is an up and coming financial writer focusing on commodity price inflation and how the overall market reacts to the price swings. She also covers emerging markets in Africa and SE Asia.
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