Greek 'unity' government fights over sharing power

Lucas Papademos is tipped as the coalition leader (Rex Features)

Greece's new power-sharing government stalled before it had started yesterday as the two main parties struggled to agree to written guarantees demanded by the EU in return for loans needed to avoid bankruptcy.

Lucas Papademos, the former central banker tipped to head the coalition, was left waiting in the wings as the partisan feuding continued last night. It is not clear whether Mr Papademos would accept the Prime Minister's job, with some friends warning him against the move. As such, the "100 days" government meant to rescue Greece from a disorderly default was in danger of failing inside of three days.

"It is essential that the entire political class is now restoring the confidence that had been lost in the Greek commitment to the EU/IMF programme," the EU Commissioner, Olli Rehn, said.

A source in the socialist party blamed the hold up on the conservative leader, Antonis Samaras, who allegedly refused to sign a commitment to the EU bailout package agreed at October's summit. Mr Samaras, who in opposition refused to back austerity measures, said his word should be a sufficient guarantee: "It's a matter of national dignity... I don't allow anybody to doubt my statements."

The troubled start to the unity government has further eroded international confidence that it can tackle a tough agenda of measures needed to secure Greece's future in the euro.

In return for €130bn in loans and a 50 per cent "haircut" on its debt, Greece must accept European observers at its ministries, an immediate €15bn public sell-off and pass next year's budget in the face of huge resistance from public sector unions.

The fresh uncertainty has also deflated public support for the coalition in Greece where an overwhelming majority support staying in the euro, despite two years of failed austerity measures with more to come.