Greek parties seal coalition deal

Greek politicians put their differences aside to agree on a coalition government.

Greek President Karolos Papoulias. Picture: AFP

ATHENS - The parties that have dominated Greece's discredited politics since 1974 agreed a coalition government on Wednesday intent on renegotiating the terms of an international bailout that is staving off bankruptcy but fuelling social tensions.

The government brings together the conservative New Democracy party and Socialist PASOK in an uneasy alliance of rivals facing an emboldened opposition determined to fight against austerity.

Party leaders said a team would be formed to renegotiate the terms of the 130 billion euro bailout, setting up a showdown with Greece's European partners who say they will adjust but not re-write the document.

Europe's debt crisis began in Greece. Two and a half years and four bailouts later - two of them for Greece - there is no end in sight.

"Our efforts have yielded a parliamentary majority to form a durable government which will bring hope and stability," New Democracy leader Antonis Samaras told President Karolos Papoulias, three days after he narrowly won a Sunday election.

PASOK leader Evangelos Venizelos warned of a "big battle" in Brussels to craft a new deal that would promote growth and contain unemployment.

"The most critical issue is the formation of the national negotiation team and ensuring that it is successful," he told reporters.

PASOK will back the government in parliament but there was no word on who would serve in the new cabinet. Venizelos said the make-up of the government remained to be fixed and would be discussed by the evening.

The conservative-socialist alliance will also be backed by the small Democratic Left party, whose leader, Fotis Kouvelis, called on the government "to gradually disengage from the terms of the bailout that has bled society."

An official from one of the three parties in the coalition said that they had agreed to name National Bank Chairman Vassilis Rapanos as finance minister.

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New Democracy narrowly beat the radical leftist Syriza bloc, which had vowed to scrap the withering terms of the bailout blamed for driving the country into depression.

New Democracy and PASOK have little history of cooperation, having alternated office from the fall of military rule in 1974 until last year, when the economic crisis brewing under their watch forced them to share power in a short-lived national unity government.

They will face immediate pressure to try to soften the bitterly resented austerity measures demanded of Greece under the bailout deal agreed in March with the European Union and International Monetary Fund, Greece's second since 2010.