Greece seals deal to form coalition government

20 Jun 2012, 10:13 pm   -   Source: AFP
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Greek pro-euro parties have agreed to a coalition government that will try to revise an unpopular EU-IMF bailout deal and pull the country out of a harrowing recession that has doomed its recovery efforts.

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Greek pro-euro parties have agreed to a coalition government that will try to revise an unpopular EU-IMF bailout deal and pull the country out of a harrowing recession that has doomed its recovery efforts.

"Greece has a government," Evangelos Venizelos, leader of the socialist Pasok party, told reporters after three days of talks with Antonis Samaras, head of the conservative New Democracy party and the likely new prime minister.

Referring to a summit of EU leaders next week, Venizelos said: "Those two days in Brussels we will carry out a major battle for revision of the loan and negotiate a framework that will boost the recovery and the fight against unemployment."

Venizelos said the precise make-up of the government would be unveiled later on Wednesday and that New Democracy, Pasok and the small Democratic Left party were "taking on the weight of collective responsibility."

National Bank of Greece chairman Vassilis Rapanos, a former professor of economics who served in the government when Greece joined the euro in 2001, is tipped to be the new finance minister, state television reported.

After two months of political deadlock, the struggling eurozone member is under intense international pressure to get back on track with reforms promised for a bailout that has kept the economy on life support for the past two years.

The International Monetary Fund (IMF) is already pressing to send a team of experts to Greece as soon as the government is announced after New Democracy narrowly won Sunday's elections against the radical leftist anti-austerity Syriza.

Democratic Left leader Fotis Kouvelis said he expected an agreement on the political platform of the new government by the end of the day, adding that it would "release the country from the painful terms" of the multi-billion bailout.

New Democracy took 129 of the 300 parliamentary seats including an extra 50 seats given to the winner and Syriza took 71 seats after garnering more than a quarter of the vote in a country struggling with its fifth year of recession. Pasok took 33 seats and Democratic Left won 17 seats, which would give the expected new government a majority of 29 seats to pass controversial reforms.

The government's first priority will be to restore contact with international auditors and resume the flow of loans that was suspended ahead of the election. Foreign creditors like Germany have stressed that they are only willing to give Greece more time to meet a deficit reduction target currently set at 2014 but will not change the actual substance of the bailout deal agreed in February.

The 61-year-old Samaras, a US-educated former foreign minister, is under pressure to go further, however, and promised in his campaign that he would cut property and sales taxes and freeze reductions in public salaries and pensions.

"There can be no discussions about changing the substance of the agreements but as I indicated three or four weeks ago we can by all means talk about extensions," Eurogroup chief Jean-Claude Juncker told Austrian radio on Tuesday.

But ahead of talks among euro finance ministers on Thursday, a senior European Union official appeared more open to possible concessions, saying it would be "delusional" and "stupid" to keep the loan agreement intact. "We would be signing off on an illusion," the source said.

This "will not be done in two weeks' time," the official said, but likely "in the course of the summer."

Under the current conditions, Greece has to cut 11.5 billion euros ($A14.41 billion) -- the equivalent of five per cent of its gross domestic product -- by 2014, although Greek parties have called for this deadline to be put off to 2016.

Greece has been forced to seek bailouts twice after initially hiding its debt woes, first for 110 billion euros in 2010 and then for 130 billion euros earlier this year. It has also had a 107-billion-euro private debt write-off. AFP jel 20-06-12 2221

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