Greece seeks new leader after 'historic' unity deal

Greek political chiefs sought Monday to put the finishing touches to a unity government and appoint a new leader as markets reacted cautiously to a power-sharing deal to keep Greece in the euro. With the debt-wracked country teetering on the brink of bankruptcy and under intense international pressure, the leaders of the top two political parties agreed late Sunday to form an emergency government before elections in February. Outgoing Prime Minister George Papandreou and the head of the main opposition party, conservative Antonis Samaras, were to continue negotiations Monday on a new interim leader tasked with implementing a vital 100 billion euro EU bailout deal. The two main figures in the running are Lucas Papademos, a former vice-president of the European Central Bank who enjoys wide international respect for his financial expertise, and Greece's current Finance Minister Evangelos Venizelos. Greek media reacted with relief to what they hailed a "historic deal", clinched after a week that was tumultuous even by recent standards for a country that has found itself in the eye of the eurozone debt storm. "Finally!" wrote pro-government Ta Nea newspaper, summing up a sense of relief throughout Greece. Praising what it called an "historic day", the paper said it was "the first major step to save the country." Greece's political leaders have "laid the foundation stones for a coalition government while the eyes of the entire world were trained on the country," added the daily. But markets reacted more cautiously, as traders turned their focus to the problems of Italy's much larger economy and what some saw as disappointing results of last week's G20 summit in France. Stocks in Madrid opened off more than three percent and Paris opened down more than one percent as the yield on Italian bonds hit a new record high of 6.5 percent. Asian share markets also drifted lower. However, the Greek market opened strongly on optimism a new administration could force through the much-needed EU rescue deal. The main Athex market opened up 2.4 percent. "We think this is a positive outcome but in line with market expectations," said Antonio Garcia Pascual, an economist at Barclays Capital. "We believe what will matter more for markets in the near term is the relatively disappointing outcome of the G20 meeting, given the lack of progress on backstop facilities," he added. Leaders of the world's top 20 economic powers Friday pushed Europe into acting to stop Italy following Greece into a debt crisis, but the G20 summit failed to come up with new funds to boost the IMF war chest. News of the Greek deal briefly lifted the euro above $1.38 in early Asian trade Monday. But the single currency quickly lost steam to $1.3765, down from $1.3788 in New York late Friday. Some analysts fretted that a unity government would find it even harder to force through painful austerity measures needed to implement the EU bailout package designed to keep Greece above water. Erik Nielsen, global chief economist at Unicredit, said: "Surely a coalition government will be more prone to interference from special interest groups and to internal disagreements, which may make further necessary adjustments increasingly difficult." And Europe was set to keep up the pressure on Greece at a crunch meeting of eurozone finance ministers in Brussels on Monday.# Ministers will debate the unlocking of a vital eight-billion-euro ($11-billion) slice of aid from an earlier bailout package in 2010 that Venizelos said is needed by December 15 to pay the bills. Sunday's drama capped a frantic week that began with Papandreou's shock announcement that Greece would hold a referendum on the massive EU rescue deal which aims to slash the country's debt by almost a third. The move stunned fellow European leaders, sent global markets into a tailspin and earned the socialist premier a humiliating dressing-down prior ahead of the G20 summit. Papandreou, who swept to power in October 2009, hastily retracted the proposal and he narrowly won a confidence vote in parliament after pledging to work for a unity government. Opinion polls published in Sunday newspapers showed Greeks largely in favour of a unity government and also wanting to keep the euro. But some Greeks appear to have had enough of their squabbling leaders. "Papandreou. Samaras. They are all the same," said Takis Karalambos, as he sipped a coffee outside a market in Athens.