Papademos to be new Greek PM

Former European Central Bank (ECB) vice-president Lucas Papademos will head Greece's new coalition government, the president's office said today, as the country faces default, bankruptcy and possible exit from the euro zone.

The coalition will be sworn in at noon tomorrow, an official in the president's office said.

Mr Papademos, a respected figure in European capitals and on financial markets, will lead a national unity government that must sign up to a €130 billion bailout deal with the euro zone before calling an early election.

He today called on all Greeks to contribute to resolving the huge problems faced by a country at a "crucial crossroads".

Mr Papademos said his new administration's main mandate is to implement a euro zone bailout deal and called for wider backing for the coalition.

"The Greek economy is facing huge problems despite the efforts undertaken," he said in his first public remarks since being named Greece's next prime minister.

"The choices we will make will be decisive for the Greek people. The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence."

Mr Papademos cuts a grey and uncharismatic figure in the colourful and chaotic world of Greek politics but also has a reputation for being calm at a time when the nation is clamouring for some kind of stability.

"He's a clear policy thinker. He was never involved in politics. He knows what needs to be done," said Thanos Papasavvas, head of currency management at Investec Asset Management in London.

Greek politicians held a fourth day of talks today at the president's mansion to agree a new government.

As well as winning parliamentary approval for the bailout, the new coalition has to pass the 2012 budget and secure the latest €8 billion instalment of Greece's original rescue, pulled together last year, to avoid bankruptcy when big debt repayments come due in December.

Yesterday, outgoing prime minister George Papandreou wished his successor well and headed off to meet the president - only for it to emerge that there was no successor due to feuding in the political parties.

Greeks and the nation's international lenders have watched on since Monday as party leaders fight over a shrinking list of credible candidates to lead the coalition.

Greece will run out of money next month unless the new government agrees emergency funding with the European Union and International Monetary Fund, Greece's last remaining lenders.

Yesterday, party sources said senior members of the socialist and conservative camps had settled on the speaker of parliament, veteran socialist Filippos Petsalnikos, as the new prime minister - barring last-minute snags.

Mr Papandreou then gave an emotional television address, supposed to be his last to the nation as premier, saying this deal had saved country's membership of the euro zone.

Mr Papandreou and conservative New Democracy leader Antonis Samaras then began talks with the president on the new coalition. However, before leaders of smaller parties could join them to seal the coalition, the meeting was abruptly halted, with large sections of Mr Papandreou's Pasok party and the conservative New Democracy refusing to back Mr Petsalnikos.

Reuters