A NEW prime minister and government are expected to be named today in Greece, with George Papandreou set to resign after agreement was reached on the formation of an emergency coalition.
Under pressure from Europe to quickly settle the political crisis behind a new wave of disruption in the euro zone, Mr Papandreou agreed last night to leave office in return for the participation of the country’s opposition in a “unity government”. His departure brings to a close a tumultuous and chaotic leadership which was dominated from the outset by the debt crisis.
The son and grandson of two former prime ministers, he took office two years ago and faced down internal rebels and huge street protests as he agreed to a series of drastic austerity programmes in return for an EU-International Monetary Fund bailout.
As the focus of EU leaders turns to Italy, euro zone finance ministers will be looking for more details about Rome’s new austerity plan when they gather this evening in Brussels for two days of talks on the debt crisis.
The EU authorities had asked Greek leaders to provide clarity about their intentions before the ministers’ talks begin. Mr Papandreou had won a confidence motion only on Friday night when he faced down a growing band of dissenters within the Pasok socialist party. However, the conservative New Democracy opposition refused to discuss the possibility of a powersharing government under his leadership.
Confirmation that he will leave office came after talks last night with New Democracy leader Antonis Samaras, brokered by Greek president Karolos Papoulias.
The president’s office said the two men had agreed to form a government of national unity to implement an EU agreement on the country’s second bailout and then hold elections.
The new government is expected to stay in office until February. Its first task will be to enact a budget for 2012, to ensure the delivery of an €8 billion loan withheld last week when Mr Papandreou called a referendum on the bailout. This schedule provides scope to negotiate detailed terms for the second bailout, which includes big losses for private creditors.
Talks continue today on the formation of the new coalition but Mr Papandreou will not lead the cabinet, the president’s statement said. He and Mr Samaras will decide today on the new prime minister, with speculation centred on former European Central Bank vice-president Lucas Papademos.
Mr Papandreou told his cabinet yesterday he would leave office only if Mr Samaras, long an opponent of the EU-IMF bailout, agreed to execute the terms of the rescue.
Senior European figures had urged both Mr Papandreou and Mr Samaras to dispel all doubt about the Greek bailout. Sources briefed on these talks said Mr Samaras was told the bailout terms are non-negotiable.
“Clarity is necessary very quickly. People will start to get very nervous if this drags on for much longer,” said one European source before the deal was unveiled a little after 10pm in Athens.
The talks take place against a backdrop of concern in Europe about the government’s abrupt dismissal of 12 military chiefs last week. Athens insisted those concerned had completed their term of office, but some euro zone officials remain puzzled by the development.
Mr Papandreou’s decision to yield power marks the culmination of a week-long drama set in train by his botched referendum plan. The initiative rattled his European sponsors, setting off turmoil in markets which brought Italian borrowing costs to new records.
German chancellor Angela Merkel and French president Nicolas Sarkozy angrily intervened, threatening to cut off the bailout if Greece did not back a referendum on its membership of the euro.
With Athens within weeks of bankruptcy, Pasok met New Democracy. Mr Papandreou abandoned the referendum. He is held to have told rebel figures in Pasok that he would stand down if they backed him in the confidence motion.