Greek party deal on new crisis premier collapses

A deal on forming a Greek national unity government collapsed today as the country headed towards an economic abyss, hours after
outgoing Prime Minister George Papandreou said he was handing over to a
coalition that does not exist.

In a day that was bizarre and chaotic even by Greek political standards, Papandreou wished his successor well and headed off to meet the president - only for it to emerge that there was no successor due to feuding in the political parties.

Earlier, party sources said senior members of the socialist and conservative camps had settled on the speaker of parliament, veteran socialist Filippos Petsalnikos, barring last-minute snags.

Snags did indeed emerge, with large sections of Papandreou's PASOK party and the conservative New Democracy refusing to back Petsalnikos after a three-day hunt for someone to lead the coalition until early elections in February.

Greeks and the nation's international lenders have watched in growing horror for three days as party leaders feuded over a shrinking list of credible candidates to lead the national unity coalition after Papandreou's government imploded.

Greece will run out of money next month unless the new government comes agrees emergency funding with the European Union and International Monetary Fund, Greece's last remaining lenders, including a €130 billion bailout.

Bring back Papademos

Some lawmakers said the parties would have to return to an earlier plan - apparently stalled - of recruiting Lucas Papademos, a former vice-president of the European Central Bank, to head the new government as a technocrat and give it the credibility that politicians lost long ago.

"The only solution is Papademos. If he accepts by tomorrow morning we will be able to form a strong government that will pull the country out of the crisis," Socialist lawmaker Spyros Vougias told Reuters.

Papandreou and New Democracy leader Antonis Samaras began talks with President Karolos Papoulias on a new coalition to save Greece from bankruptcy. But before leaders of smaller parties could join them to seal the coalition, the talks were abruptly halted.

The president's office said a meeting of party leaders would be held at 0800 GMT on Thursday, although in the current chaotic atmosphere political talks are often delayed or fail to happen at all.

"This whole affair does not do us much honour," said one member of Papandreou's cabinet, who asked not to be named. "There are moves by MPs in both major parties to sign a joint letter against Petsalnikos."

Party sources said some lawmakers saw Petsalnikos as a pawn of Papandreou, and attacked him for supporting the prime minister's failed plan to call a referendum on the bailout, which brought his socialist government to its knees.

(Additional reporting by Harry Papachristou, Renee Maltezou and Angeliki Koutantou)