Talks on Greek coalition to start soon: Papandreou

By Lefteris Papadimas and Renee Maltezou

ATHENS | Sat Nov 5, 2011 8:18am EDT

(Reuters) - Negotiations to form a Greek coalition government will start soon, Prime Minister George Papandreou said on Saturday, launching a new push to save the nation from bankruptcy and prevent its crisis from sweeping over Europe and beyond.

Papandreou told the Greek president that the nation had to forge a political consensus to prove it wanted to keep the euro, as European leaders try to persuade the outside world that the currency bloc can overcome its huge debt problems.

"In order to create this wider cooperation, we will start the necessary procedures and contacts soon," he told reporters after meeting President Karolos Papoulias.

Hours after surviving a parliamentary confidence vote, Papandreou said Greece had to avoid early elections, calling for a broad-based government to secure a bailout from the euro zone, the main weapon in Europe's battle against the spreading economic crisis.

"My aim is to immediately create a government of cooperation," he told the president in the presence of reporters before they held talks behind closed doors. "A lack of consensus would worry our European partners over our country's will to stay in the euro zone."

Political sources involved in the dealmaking said negotiations are being led behind the scenes by Finance Minister Evangelos Venizelos, who aims to head the new coalition.

FAMOUS FATHER, FAMOUS GRANDFATHER

The sources said Papandreou, a socialist whose father and grandfather were Greek prime ministers, would step aside to make way for Venizelos, the man he beat to his PASOK party's leadership in 2004.

Without saying when he might quit, Papandreou -- who has led

Greece through two years of political, economic and social turmoil -- said he was ready to discuss who should lead the new government which would rule until elections probably early next year.

"The last thing I care about is my post. I don't care even if I am not re-elected. The time has come to make a new effort ... I never thought of politics as a profession," he told parliament before the vote in the early hours of Saturday.

A new coalition is likely to exclude the main opposition party, the conservative New Democracy.

Papandreou said the coalition should aim to ram the 130-billion-euro bailout deal through the assembly, the last financial lifeline for a nation that is due to run out of money in December.

Under heavy domestic and international pressure, the prime minister has backed down on a proposal for a referendum on the euro zone rescue. Greek voters could well have rejected the deal, potentially sinking euro zone leaders' attempts to stop the debt crisis devastating economies such as Italy and Spain.

THINGS MAY TURN UGLY

Greeks, burdened by waves of spending and welfare cuts plus tax rises which have pushed the country into a long recession, expressed disgust at the political wrangling up at parliament.

"I'm sick of politicians in Greece, and feel that things will now turn ugly. If only they could cooperate, everything would be much better," said Tassos Pagonis, a 48-year-old Athens taxi driver. "But will Greece be saved? I'm afraid not. Europeans don't trust us anymore, they will throw us out."

Pagonis expressed a fear widespread in the nation -- that Greece might be forced out of the euro zone to go it alone with a revived national currency. "I hope we don't return to the drachma," he said.

Pensioner Yiannis Vlahos, 83, compared the fates of Greece and Germany, which occupied the country in World War Two.

"When the Germans left we had some hope. They were ruined by World War Two but they worked hard and became the strongest economy. We Greeks haven't learned our lesson, we only steal," he said. "We ourselves hate our beautiful country."

Papandreou's socialist government won with 153 votes in the 300 member parliament, and a rebellion by some dissidents in his PASOK party failed to materialize after he indicated that his term as prime minister was close to an end.

The leaders of France and Germany told Papandreou this week that Greece would not get a cent more of aid if Greece failed to approve the bailout, meaning that the state would run out of money in December.

Newspapers labeled Papandreou's confidence victory as little more than a deal paving the way for a new government without Papandreou. The pro-government Ta Nea ran with "New government now!"

Greece has been racked by torment since soon after Papandreou won power in 2009 and revealed that the real budget deficit was three times bigger than original estimates put out by his conservative predecessor.

International investors took fright, Greece's borrowing costs soared and Papandreou was forced to go cap in hand last year to the only bodies still willing to lend at affordable rates -- the European Union and IMF.

In return they demanded wave after wave of spending cuts, tax rises and pension cuts which provoked widespread protests on the streets on Greek cities, with bloody clashes between demonstrators and riot police in Athens.

FAILING AGAIN

Masamichi Adachi, senior economist at JP Morgan Securities Japan, said the main concern was what would happen when international lenders returned to Athens in the coming months to assess the progress of the austerity plan and "find them failing again."

"This is just pushing away the timing of the real problem. Of course it's welcome that Greece didn't blow up today, but it doesn't solve the problem."

Analysts said Papandreou's victory had been Pyrrhic, and many ordinary Greeks said they were disenchanted with Byzantine political wrangling that was not addressing their basic need for jobs and cash.

Sources said Venizelos has won the backing of leaders of some smaller parties to support a coalition that he would head. The leaders of the far-right LAOS party and another center-right party indicated after Papandreou's speech that they would cooperate in a new coalition.

In parliament, Venizelos said a new government should rule until next February and then call elections.

Opposition leader Antonis Samaras counted his New Democracy party out of the coalition, saying Papandreou had spurned his call for a national unity government. "Mr Papandreou rejected our proposal. The only solution is elections," he said.

(Additional reporting by Reuters Athens bureau; Writing by David Stamp)