Interim Greek government to be announced Wednesday

A Greek government official says the names of those who will form the new Greek interim government will be announced on Wednesday afternoon.
Greece's Prime Minister George Papandreou holds an emergency cabinet meeting at the parliament in Athens on Tuesday. (Reuters)

A Greek government official says the names of those who will form the new Greek interim government will be announced on Wednesday afternoon.

The statement came as power-sharing talks between Prime Minister George Papandreou and opposition leader Antonis Samaras dragged into a third day without any public sign of progress. That's the case despite intense European pressure to end a political crisis that has put the euro under threat.

The official spoke on condition of anonymity because he was not authorized to speak on the record.

The official said Papandreou was to visit the country's president at mid-day. The president would then chair a meeting of political party leaders, and an announcement of the government will come after that.

Talks between Papandreou and Samaras began Monday. The two agreed over the weekend to forge an interim government that will shepherd the country's new €130 billion ($179 billion US) European rescue package through Parliament and end an intense political crisis that threatened Greece's solvency and membership of the euro.

Papandreou said in the early afternoon that a deal was close. Two government officials said the most likely candidate to replace him as premier was former European Central Bank vice-president Lucas Papademos. Both spoke on condition of anonymity because the names of candidates had not been publicly released.

But as the evening wore on, several government and opposition officials said a main sticking point arose after European officials demanded written guarantees by both main parties that they supported the new debt deal — a demand with which the opposition conservatives took issue. All the officials spoke on condition of anonymity to discuss sensitive negotiations.

On Monday, eurozone finance ministers said the heads of the two main parties had to commit in writing to the terms of the country's bailouts before Athens can receive a vital €8 billion ($11 billion  US) loan installment without which the country faces default within weeks.

"It is indeed essential that a new government will express its explicit and unequivocal commitment in writing concerning all the decisions taken by the 17 euro area member states on Oct. 27," EU economic affairs commissioner Olli Rehn said in Brussels Tuesday.

The next rescue loan installment "can then be disbursed once there is full clarity about Greece sticking to the agreed course and policies," Rehn said. "It should be clear in Athens that solidarity is a two-way street and we expect a united political class to carry out its part of responsibilities."

Conservative party spokesman Yiannis Michelakis reacted with irritation.

"The fact that Europe has lost any trace of trust in the (Socialist) government does not mean it can insult our national dignity," he said in a statement in response to Rehn's statement.

Earlier in the day, a senior Greek government official said Greece's eurozone partners had demanded even more during their meeting in Brussels on Monday — that Papandreou and Samaras, the Bank of Greece governor, the new prime minister and the new finance minister all co-sign a letter reaffirming their commitment to the country's bailout deals and economic reforms.

Samaras appeared to take offence.

"There is national dignity," he said in a statement. "I have long and repeatedly explained why, in order to protect the Greek economy and the euro, the implementation of the (new European debt deal) has become 'inevitable'. I do not allow anyone to cast doubt on these statements."

Without the Oct. 27 deal, which took European leaders months to work out, Greece would go bankrupt, potentially wrecking Europe's banking system and sending the global economy back into recession.

"I believe that we are now close to an agreement with New Democracy," Papandreou said during a Cabinet meeting Tuesday afternoon, referring to Samaras' conservative party.

"When one co-operates with another party, there are some red lines on either side which of course restrict things," he said. "Therefore, while one could imagine ideal situations, in reality these do not exist, and one seeks simply to find the best possible solution."

Papandreou's ministers offered him their resignations during the Cabinet meeting to pave the way for the creation of the interim government, which is to last until an early election expected Feb. 19.

The political crisis erupted last week, when Papandreou said he would put the new European rescue package to a referendum. Other eurozone nations were horrified by the delay, markets around the world tanked and Greece's international creditors froze the payment of the next bailout.

Papandreou withdrew the plan Thursday after Samaras indicated he would back the new deal. They then reached a landmark agreement Sunday for Papandreou to step down and the temporary government to be formed.

Greece has survived since May 2010 on a €110 billion ($150 billion US) rescue-loan program from its eurozone partners and the International Monetary Fund, but all agree it's not enough. A second rescue package has been created that involves private bondholders voluntarily agreeing to cancel 50 per cent of their Greek debt.

In return for its bailout cash, Greece has endured 20 months of punishing austerity measures. The efforts by Papandreou's government to keep the country solvent have prompted violent protests, crippling strikes and a sharp decline in living standards for most Greeks.