Greek PM Papandreou faces unity challenge over bailout

Greece's PM George Papandreou smiled and clapped as the results were read out

Global Economy

Greek PM George Papandreou is facing a major challenge in his efforts to deal with the country's debt crisis.

He has been in talks with President Carolos Papoulias on forming a government of national unity to ratify a vital eurozone bailout deal.

But the main opposition party has said it would not join a coalition under Mr Papandreou and has demanded elections.

It comes after Mr Papandreou's ruling Socialist (Pasok) party narrowly won a confidence vote on Friday night.

As he entered Saturday's brief meeting at the presidential palace, Mr Papandreou said government co-operation was "necessary to guarantee - for Greece and for our partners - that we can honour our commitments".

"I am concerned that a lack of co-operation could trouble how our partners see our will and desire to remain in the central core of the European Union and the euro."

As he left after about an hour, he said the process of forming a coalition government would begin soon, but few other details emerged.

The prime minister has been fighting for his political life in the past week, facing calls for his resignation even from within his own party.

Earlier this week he shocked EU partners and sent markets into turmoil after calling for a referendum on the hard-fought EU deal struck last month to great fanfare.

The referendum plan was abandoned, but the BBC's Mark Lowen in Athens says it is looking increasingly unlikely that Mr Papandreou will lead a future coalition.

Reports are emerging that Finance Minister Evangelos Venizelos could replace him as interim prime minister. Mr Venizelos has said elections could be held once procedures for securing the EU bailout package were finished.

Analysis

Mark LowenBBC News, Athens

By winning the vote George Papandreou has crossed a hurdle, but several more remain.

He will seek a broad consensus on last week's bailout deal for Greece negotiated in Brussels, reaching out to the opposition. And he will inform the president that he intends to begin talks on forming a national unity government.

The question now is whether Mr Papandreou is simply buying time, trying to rebuild his credibility by voting through the bailout before calling a poll which he still hopes to win. Or is his aim to secure a ratification of the deal and then to seek a dignified exit?

With the opposition New Democracy party calling for his resignation, it would be difficult for Mr Papandreou to take the reins of a national unity government.

But the prime minister has shown himself to be a deeply unpredictable leader. Greeks - and all of Europe - are watching anxiously for his next move.

New Democracy party leader Antonis Samaras has already dismissed the prime minister's idea of a coalition government, saying Mr Papandreou had rejected his proposals.

"The responsibility he bears is huge," he said. "The only solution is elections."

The late-night confidence vote - timed to take place when markets in Europe and the US were closed - was on a knife-edge, but the government eventually won with 153 votes to 145.

During the hours of debate, Mr Papandreou said the bailout deal currently on offer by the EU had to be accepted, and it would be "historically irresponsible" to lose it.

Immediate elections would be "catastrophic" for the deal, he said, so proposed a new, broad coalition to take charge until it had been agreed.

"I therefore ask for a vote of confidence in order to ensure the security of this nation."

Hinting that he might stand aside, he said he would not put personal ambition before saving the country.

"I am not interested in any post, the last thing I am interested in is whether I am re-elected," he said.

Bankruptcy

Outside parliament, several thousand communist supporters staged a noisy rally, banging drums and waving red flags, while hundreds of riot police stood guard nearby.

German Chancellor Angela Merkel's chief whip in the German parliament, Peter Altmeier, hailed the confidence vote as an important development.

"It matters if they are able to form a cross-party government of national unity," he told the BBC's Newsnight.

Hundreds of communist protesters held a rally outside parliament

"That is what they should do and this government of national unity should engage in a... commitment to implement this reform package."

The Greek debt crisis had dominated the agenda at the G20 summit in Cannes this week, where Mr Papandreou was summoned for urgent talks on Wednesday.

European Commission President Jose Manuel Barroso acknowledged it was possible that Greece could end up leaving the eurozone, but said it was "in their interests" to stay.

"I think the principle of a country leaving the euro is not a good one. But at the end, it depends on them being able to implement the decisions taken together," he said.

The summit put the next tranche of Greece's existing bailout on hold. Without the bailout funds, Greece may go bankrupt before the end of the year.

The leaders in Cannes also agreed to boost the resources of the International Monetary Fund (IMF) in an effort to support economic growth.

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

Although the Greek public has strongly resisted the austerity measures, a recent opinion poll in a newspaper showed 70% wanted to remain within the eurozone.

Σάββατο 5 Νοεμβρίου 2011