Greek coalition government possible Wednesday

ATHENS, Greece (AP) ? A coalition government could be formed by mid-Wednesday in Greece, the head of the country's socialist party said Tuesday, easing the nation from political limbo as it struggles to deal with a financial crisis that has affected Europe's economy and markets around the world.

Evangelos Venizelos, whose PASOK party came third in Sunday's elections, said the socialists "will support this government sincerely and will participate in it in the most beneficial way in order to make it effective and credible."

At the core of any administration would be Antonis Samaras' conservative New Democracy party, which came first in Sunday's vote and won 129 of Parliament's 300 seats ? short of the 151 needed to govern alone.

The radical left Syriza party, which finished in second place, with 71 seats, has refused to join any government that will implement the terms of Greece's international bailout, under which the country has received billions of euros in rescue loans in return for deeply unpopular spending cuts and tax hikes.

Venizelos, who handled Greece's negotiations with its international creditors for several months last year as finance minister, said that due to Syriza's stance, the government would have the support of the election winner, PASOK and the small Democratic Left party of Fotis Kouvelis, which won 17 seats.

"With Syriza's refusal, the only practical solution now is the creation of a government with the support of New Democracy, PASOK, and the Democratic Left," he said after several hours of negotiations. "I repeat that this government must be formed as soon as possible. As things stand now, this can be achieved by mid-day tomorrow."

PASOK will convene its deputies Wednesday morning to define exactly how the party will participate, he said.

Although numerically Samaras could form a government with just PASOK, which has 33 seats, both have sought a broader alliance that would be seen as potentially more stable and better able to weather the continuing storm of austerity measures taken in return for Greece's rescue loans.

Such a government would broadly fulfill Greece's pledges to its bailout creditors for further cutbacks and reforms, keeping the country within Europe's joint currency. Otherwise, Greece would run out of cash and the continent could plunge deeper into a financial nightmare with global repercussions.

The austerity measures have left Greece struggling through its fifth year of a deep recession, with unemployment spiraling to 22 percent and tens of thousands of businesses shutting down.

Fury over the cuts that have seen salaries and pensions slashed in the public sector propelled Syriza, led by 37-year-old Alexis Tsipras, from 4.6 percent in 2009 to nearly 27 percent in Sunday's election and gave anti-austerity parties more than 50 percent in total.

Tsipras had campaigned on a strong anti-bailout ticket, vowing to scrap the country's pledges and play tough with creditors ? Greece's European partners and the International Monetary Fund.

With public anger palpable, both Venizelos and Samaras say they will seek changes to some of the terms in Greece's bailout deals, on which the country has depended since May 2010. But they have pledged to respect the commitments for further austerity and reform.

They are pressing for an extension of at least two years in the deadline, which would alleviate the immediate impact of new cutbacks and is seen as a likely concession by creditors. The Democratic Left is anti-austerity in principle, but has insisted that its main priority is keeping Greece in the Eurozone.

"The most important issue is not the government's composition, but the national negotiating team that will strive to achieve the best possible revision of the loan agreement so that we can keep all the positives and to counter the recession and unemployment and to bring positive growth and jobs," Venizelos said.

Austrian Finance Minister Maria Fekter said Tuesday that any changes to the bailout deal would be "an adaptation of a pragmatic nature" after debt inspectors from major creditors visit Athens.

Separately, a European Union official said the terms of Greece's bailout will be renegotiated because worsening economic conditions have made the old agreement an "illusion."

The official, who spoke on condition of anonymity, citing policy, said the goals of the agreement would still be to reduce Greece's debt and reform its economy to make it competitive. But how they are achieved would be up for discussion, the official said.

Samaras' three-day mandate to form a government expires Wednesday night. If it fails, Syriza would get a chance to form a government, followed by the Socialists. But Tsipras has said he will pass on the mandate and not even try to form a government. Venizelos has advocated circumventing the entire process and proceeding straight to a meeting of party leaders under President Karolos Papoulias.

Setting apart their bitter rivalry stemming from four decades of what was effectively a two-party system, New Democracy and PASOK took part in a brief coalition government earlier this year.

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Menelaos Hadjicostis in Athens, Sarah DiLorenzo in Brussels and Geir Moulson in Berlin contributed.

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