Greek PM calls for coalition

Greek prime minister George Papandreou won a parliamentary confidence vote tonight, avoiding snap elections which would have torpedoed Greece's bailout deal and inflamed the euro zone's economic crisis.

Mr Papandreou's socialist government won with all his party lawmakers in the 300 member parliament supporting the government, but his term as prime minister appeared close to an end.

Earlier Mr Papandreou called for a new coalition government to approve the €130 billion bailout deal which is vital for saving the country from bankruptcy and tackling the euro zone's economic crisis, and signalled he was ready to stand down.

Mr Papandreou told parliament before the vote that he would go to the Greek president tomorrow to discuss formation of a broader-based government that would secure the euro zone bailout, Greece's last financial lifeline, adding that he was willing to discuss who would head a new administration.

"The last thing I care about is my post. I don't care even if I am not re-elected. The time has come to make a new effort... I never thought of politics as a profession," he said before a parliamentary vote of confidence in his government.

Earlier, sources said finance Minister Evangelos Venizelos has won the backing of leaders of some smaller parties to support a new coalition that he would head.

The new government would force the euro zone bailout deal through parliament before calling early elections in a few months, sources close to the deal said.

The leaders of the far-right Laos party and another centre-right party indicated after Mr Papandreou's speech that they would cooperate in a new coalition.

Mr Papandreou provoked uproar at home and abroad on Monday when he announced a referendum on the bailout, agreed by euro zone leaders only last week.

Under heavy domestic and international pressure, he backed down on a vote which could well have rejected the deal, cutting off Greece's last financial lifeline and potentially sinking euro zone leaders' attempts to stop the debt crisis devastating the bloc's bigger economies such as Italy and Spain.

The government officially announced earlier today that the referendum would not go ahead.

The move prompted European leaders to threaten to cut off rescue aid for Athens, plunging its government into chaos.

Uncertainty over the fate of Mr Papandreou and his administration overshadowed a G20 summit in Cannes, at which European leaders came under renewed pressure from their global counterparts to settle finally the debt debacle.

European Commission president Jose Barroso said today the European Union is fully committed to supporting Greece. He said he expected a government of national unity will conclude the EU agreement before Greece runs out of funds next month.

The catalyst for the ructions yesterday was a blunt ultimatum from German chancellor Angela Merkel and French president Nicolas Sarkozy that Europe would block a crucial €8 billion loan until the referendum was passed.

“I don’t want to give any idea that we’re trying to get involved in Greek domestic politics but if we’re talking about defending the euro zone, the euro and Europe, then that’s our obligation, our duty,” Mr Sarkozy told reporters in Cannes.

The Franco-German intervention, backed by the International Monetary Fund, forced the pace of events in Athens as Mr Papandreou engaged in frantic talks to hold back defections from Pasok while seeking a rapprochement with the country’s main opposition party.

The manoeuvres in Athens, which was in the grip of fevered political speculation all day long, were greeted with some relief in Cannes.

While sources briefed in behind-the-scenes talks with the Greek authorities said the accord was something of a breakthrough, they acknowledged that the affair did not bode well for Europe’s effort to assert control over the crisis.

Mr Sarkozy and Dr Merkel had issued the ultimatum to Mr Papandreou in the course of a bruising pre-summit meeting in which they sharply rebuked him for calling the referendum. In addition to withholding the loan, which Athens needs to avert bankruptcy within weeks, they insisted that Greek voters be asked whether the country should stay in the euro or leave the currency.

Reuters