National unity government in Greece

Greece’s two mainstream political parties have agreed on a narrow pact for a national unity government after intense pressure from the EU, which warned that the country would be left to go bankrupt, perhaps within days, if a cross-party consensus was not achieved.

The centre-left prime minister, George Papandreou, loathed by millions of his fellow citizens for the imposition of far-reaching spending cuts, is to step aside once the new administration is in place, although who is to replace him has yet to be decided.

The coalition is tasked with approving a €130 billion EU-IMF bail-out deal, the second the country has been saddled with in the past two years, a package that will ensure that it is able to avoid bankruptcy and pay its largely central European creditors in return for years of austerity measures and international supervision of its finances.

The new administration will comprise the governing social democrats of Pasok and the right-wing New Democracy party. Papandreou had earlier approached Laos, a far-right religious party in the parliament and the Democratic Alliance, a small free-market liberal breakaway from the conservatives, to shore up his 152-seat majority in the 300-member house.

On Sunday, EU economy chief Olli Rehn had made it clear that without a coalition government, Greece would be cast adrift. He gave the country’s political elite hours to come up with a deal, ahead of a meeting of EU finance ministers on Monday evening.

Talks on a national unity government came after a long drama played out in the Greek parliament on friday. Papandreu survived a confidence vote on his government after a contentious move to hold a referendum on the Greek rescue deal put together in Brussels last week.

Europe delivered a stark ultimatum to Greece on Wednesday night, demanding that the country’s planned referendum ask plainly whether the country’s citizens wish to stay in the euro or to get out. "The question is whether Greece remains in the eurozone, that is what we want. But it is up to the Greek people to answer that question," Sarkozy said, adding that Greece would not receive "a single cent" if it does not adhere to the bail-out plan agreed last week.

Following the European reactions Papandreou has backed away from holding a referendum on a €130 EU bail-out deal and has agreed to talks with the conservative opposition over the construction of a transitional government leading to early elections.

Source: Euobserver