Greeks in deal on new government in bid to save bailout, euro

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REPORTING FROM ATHENS -- In a break with a legacy of long-standing rivalry, Greece’s ruling Socialists and opposition conservatives agreed to form a unity government Sunday after a week of political turmoil that threatened to push the country into bankruptcy and out of Europe’s single currency.

Under the agreement, embattled Prime Minister George Papandreou will step down and his successor will be decided Monday in a second round of talks.

The agreement followed crisis talks that President Karolos Papoulias held Sunday with Papandreou and conservative New Democracy leader Antonis Samaras.

A statement issued by the president’s office said the new government would expire and elections would be held once Greece’s implementation of the current European bailout plan had been secured. The timing of those events is unclear.

The agreement follows immense pressure from European officials who wanted to see quick implementation of the bailout plan to prevent the Greek crisis from spilling over to larger economies such as Spain and Italy. Officials warned over the weekend that a failure by Greece to form a unity government could spell its exit from the euro currency system.

The European plan calls for private banks to take a 50% write-down on the value of Greek bonds they hold and for the Greek government to get a $140-billion loan in the second bailout stitched together by the European Union and the International Monetary Fund in a year.

Sunday’s political deal is expected to offer some measure of reassurance for international markets and skittish investors who saw shares on global stock markets seesaw last week.

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Antonis Samaras, leader of the conservative New Democracy party, in the presidential palace in Athens on Sunday. Credit: John Kolesidis / Reuters