Greek leaders struggle to agree on PM

ATHENS (Reuters) - Greek political leaders were scrambling on Wednesday to agree on new prime minister to lead the country back from the brink of bankruptcy, after a plan to name a former European Central Bank official appeared to fall apart.

A government spokesman said a new crisis coalition would be named as early as Wednesday afternoon, but there was little indication of a deal on who would lead the administration.

In the past two days government sources have made a number of optimistic predictions about forming the government, which must secure a 130-billion-euro ($180-billion) bailout from the euro zone, only for no deal to materialize.

"Today, the (outgoing) prime minister will meet the president of the republic," deputy government spokesman Angelos Tolkas said on NET radio. "Everything will happen in such a way that after 12 (5 a.m. ET) we will have the announcement of the new government."

The socialist and conservative parties had wanted former ECB vice-president Lucas Papademos to lead the government of national unity, aiming to re-establish an international credibility that the politicians lost long ago.

But sources in both parties said this was now in doubt and the two sides were looking at other options.

"The Papademos candidacy has hit problems that have to do with both parties," one of the sources told Reuters on condition of anonymity.

UNACCEPTABLE CONDITIONS

Some Greek media reported that Papademos had set conditions that the parties would not accept, and others that there were objections from Finance Minister Evangelos Venizelos, because Papademos wanted to change the government's economic team.

Greek media have mentioned parliamentary speaker Filippos Petsalnikos and socialist lawmaker Apostolos Kaklamanis as alternative premiers, but both have denied the reports that they had been picked.

The President of the European Court of Justice Vassilios Skouris was the latest name being discussed, according to a source in the ruling socialist party.[ID:nA8E7KM05J]

The stakes could not be higher. Greece must have a new coalition to secure the bailout, negotiate the release of emergency funds from the EU and IMF to avoid bankruptcy when big debt repayments come due next month, and safeguard its place in the euro zone.

On the other hand, the European Union needs to put out the fire in Greece to prove to international financial markets that it can tackle another blaze in Italy, a far bigger economy also in the middle of economic and political crisis.

The pro-government daily Ethnos summed up the exasperation felt by Greeks with its headline: "Find a solution! A thriller with the selection of a prime minister."

To Vima news website evoked a national fear that Greece might lose its euro zone membership, and be cast adrift to survive alone with its old currency.

"Despite its huge defeat, our political system won't get serious at the time when the country is threatened with complete collapse, wavering between the euro and the drachma," it said.

DOUBLE DISPUTE

Adding to the confusion, conservative leader Antonis Samaras became embroiled in a dispute within his New Democracy party and a related row with the European Union.

Party political sources said some New Democracy lawmakers were accusing Samaras of giving away too much, especially when he agreed to accept austerity measures in the bailout package.

Samaras had long argued that the spending cuts, tax rises and job losses imposed by the outgoing socialist government under orders from the EU and IMF had deepened Greece's crippling recession, now in its fourth year.

A New Democracy party source refused to accept the party was the main problem, but acknowledged internal divisions since Samaras staged his U-turn on the package last week, helping to open the way for Sunday's agreement in principle.

"Parts of New Democracy are causing trouble. Many party officials around Samaras don't like the way things are going," the source said on condition of anonymity.

Under pressure from party dissidents, Samaras attacked the EU for demanding written undertakings from Greece that it would stand by its promises to implement the bailout package which euro zone leaders agreed last month.

European Economic and Monetary Affairs Commissioner Olli Rehn made the demand, exasperated by Greece's record of making promises on tackling its huge debt and budget deficit and then falling short of fulfilling them.

Rehn singled out a decision by Prime Minister George Papandreou last week to call a referendum on the bailout, a vote which might have seen Greeks reject the package because of the austerity measures tied to it. Papandreou backed down, but was forced into agreeing to make way for the unity coalition.

BROKEN CONFIDENCE

Speaking in Brussels, Rehn said Greece had breached confidence with the EU by calling the referendum. Now Brussels needed undertakings to release even the next 8-billion-euro installment of funding for Greece under its original bailout package, pulled together last year.

"This confidence needs to be mended," said Rehn. "Finance ministers of the euro area expect that there is ... a written commitment, a written confirmation of the commitment of a broad-based government of national unity."

A government source said the EU wanted Samaras to sign, along with the new prime minister, finance minister, central bank governor and outgoing Prime Minister Papandreou.

The New Democracy response was blunt. Samaras hinted in a statement he might give no written assurances because his spoken word was enough. "It's a matter of national dignity ... I don't allow anybody to doubt my statements," he said.

(Additional reporting by Lefteris Papadimas, Angeliki Koutantou, Daphne Papadopoulou; Writing by David Stamp and Ingrid Melander)

Source: Reuters US Online Report Top News