Greek power-sharing talks in 2nd day

[November 08, 2011]  ATHENS, Greece (AP) -- Power-sharing talks between Greece's two main political parties dragged into their second day Tuesday with no indication as to whether they were any closer to agreeing on a new interim prime minister.

The protracted discussions over the formation of a unity government is beginning to unnerve European leaders, who have stepped up the pressure on Athens by holding back a vital rescue loan that the country needs to prevent a devastating bankruptcy.

Socialist Prime Minister George Papandreou and conservative party head Antonis Samaras have been wrangling over who will lead an interim government that aims to secure a new euro130 billion ($179 billion) European rescue package, agreed less than two weeks ago.

Greece's European partners have been pressing for a swift resolution.

Jean-Claude Juncker, the chairman of the eurozone's finance ministers, said Monday that the leaders of the two main parties must co-sign a letter reaffirming their commitment to Greece's bailouts and economic reforms before the next batch of cash from the first bailout, worth euro8 billion ($11 billion), is handed over to Athens.

Without the funds, Greece will default before Christmas, sending shockwaves through Europe's banking system and potentially pushing the global economy back into recession.

Papandreou and Samaras reached a landmark agreement late Sunday for Papandreou to step down and the temporary government to be formed. The new prime minister would serve until an early election is held next year, with the most likely date being Feb. 19, the finance ministry has said.

The two main candidates being considered as interim premier are former European Central Bank Vice President Lucas Papademos and European Ombudsman Nikiforos Diamantouros, officials with knowledge of the negotiations told The Associated Press. They asked not to be identified, citing the sensitivity of the talks.

None of the people being considered have been announced publicly.

"What's happening is unbelievable," said Dora Bakoyannis, a former foreign minister and conservative party lawmaker who was expelled from the party for breaking ranks and voting in favor of an earlier austerity plan. She has now formed her own party.

"The country cannot take these petty political games any longer ... What are they trying to do? Save their skin? But if the whole country goes down, who's skin will be saved?" she said on Greece's Skai television.

"The problem is not finding serious candidates, but whether those candidates will be allowed to do their job and not asked to be puppets."

The talks between the two leaders come after last week's political crisis in the wake of Papandreou's announcement to put the recently-negotiated debt deal to a referendum. He withdrew the plan Thursday following anger from European leaders, an open revolt from within his Socialist party and turmoil in the financial markets.

Papandreou, halfway through his four-year term, has said he will step down after a power-sharing deal is reached.

An agreement on who will lead the new government had been expected Monday, but telephone negotiations between Papandreou and Samaras had produced no public announcement by Tuesday morning. Some officials had expected a result before a Cabinet meeting that began in the early afternoon.

"When trust, honesty and sincerity prevails in relations between political parties, then the outcome is better for the people, the country, and of course the European Union," Civil Protection Minister Christos Papoutsis said as he headed into the Cabinet meeting.

After Papandreou's referendum announcement, the country's international creditors froze the critical installment. Frustrated with the political turmoil in Greece, they have maintained the pressure even after the public vote idea was officially canceled.

Greece has survived since May 2010 on a euro110 billion ($150 billion) 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 which involves private bondholders who have agreed to cancel 50 percent of their Greek debt.

Though Greece has been locked out of long-term bond markets because of excessively-high interest rates, it has maintained a limited present in the market for short-term cash.

It raised euro1.3 billion in 26-week treasury bill auction Tuesday, with the sale producing a yield of 4.89 percent, only marginally higher than the 4.86 percent interest rate from a similar auction on Oct. 11. Tuesday's sale was 2.91 times oversubscribed, up on October's equivalent 2.73.

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.

[Associated Press; By ELENA BECATOROS]

Associated Press writer Derek Gatopoulos in Athens contributed to this report.

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