Greek parties set for more wrangling, compromise

ATHENS Greek leaders were beginning a second day of talks and behind-the-scenes wrangling on Sunday to break a political deadlock that threatens to push the debt-laden nation closer to bankruptcy and out of the euro zone.

Greece's president has appealed for cooperation to resolve the political crisis after a tumultuous week during which Prime Minister George Papandreou first announced and then ditched a plan for a referendum on a euro zone bailout package, leaving his grip on power sharply weakened.

With cash in its coffers expected to last just over five weeks, Greece has been plunged into a fresh bout of uncertainty as both the ruling socialists and opposition conservatives offer rival plans to resolve the stalemate.

For Papandreou, only a coalition government ruling for at least several months can set Greece on the road to national salvation and secure a financial lifeline from international lenders before the money runs out.

But the conservative opposition led by Antonis Samaras flatly rejected the idea, offering its competing vision of snap elections -- and demanding Papandreou's resignation after two years of grappling with economic, political and social turmoil.

"Even now, we hope and wish that Mr. Samaras changes his position," Angelos Tolkas, a deputy government spokesman, told Greek television. "The country cannot afford to be left ungoverned. And we are running out of time."

President Karolos Papoulias, who meets Samaras for talks on Sunday, has urged the opposing sides to overcome their differences and get to work solving a crisis which risks wrecking international faith in the entire euro project.

"Consensus is the one and only way," Papoulias told the prime minister when he went to the presidential palace to launch his drive for a coalition government on Saturday.

At immediate stake is the fate of Greece's 130 billion euro bailout, agreed by euro zone leaders to keep Athens afloat and restore confidence on global financial markets that the euro zone nations can handle a crisis that could afflict much bigger economies such as Italy and Spain.

Newspapers were packed with speculation over various scenarios that could emerge from the talks, with the Kathimerini daily calling it "Haggling atop the Titanic."

Papandreou's socialist cabinet is due to meet informally on Sunday, as his PASOK party searches for support among the smaller parties, with Finance Minister Evangelos Venizelos playing a leading role.

Only a week ago the bailout deal seemed in the bag, but then Papandreou dropped a bombshell by announcing he would hold a popular vote on the package -- which demands yet another wave of austerity be imposed on the long-suffering Greek population.

With the deal threatening to unravel, Germany and France told Papandreou that Greece would receive not one cent more in aid unless it fulfilled its side of the bargain.

Papandreou retreated on the referendum, but only after German Chancellor Angela Merkel and French President Nicolas Sarkozy said Greece must make up its mind whether it wanted to stay in the euro or not.

A CHASTENED PAPANDREOU

Chastened, Papandreou was forced to signal that he was willing to stand down. He himself raised the specter of Greece's future in the euro.

"My aim is to immediately create a government of cooperation," he said at the presidential palace. "A lack of consensus would worry our European partners over our country's will to stay in the euro zone."

Here he hit a raw nerve. Greeks have fought tooth and nail against the spending cuts and tax rises demanded by their international lenders in the euro zone and IMF, with some protests turning violent on the streets of Athens.

But there is also a widespread fear that Greece might be forced out of the euro and will have to go it alone with a revived national currency.

"Europeans don't trust us anymore, they will throw us out," said Tassos Pagonis, a 48-year-old Athens taxi driver. "I hope we don't return to the drachma."

The opposition showed little sign of giving ground.

"We ask for a short-term transitional government in order to restore a sense of stability and then the country goes to the polls," said Samaras. "We did not seek a role in this government, only that Mr. Papandreou, who has become dangerous for the country, resigns."

Opinion polls suggested Greeks favor Papandreou's model of a longer-serving unity government.

One survey commissioned by Proto Thema newspaper showed 52 percent of the public backed the idea of a national unity government while 36 percent wanted snap elections. Another poll commissioned by Ethnos newspaper put support for the rival proposals at 45 percent and 41.7 percent respectively.

A government source said Papandreou's deputy, Finance Minister Venizelos, was already negotiating behind the scenes to win support from the smaller parties for a government that Venizelos himself wants to lead.

"Venizelos is having contacts with party leaders to secure their agreement," said a government official who requested anonymity.

In snubbing Papandreou, who survived a parliamentary confidence vote in the early hours of Saturday, Samaras acknowledged the leading role being played by Venizelos in the maneuvering for power.

"Whenever we try to find a way out, the Papandreou-Venizelos government invents new obstacles to block it," he complained.

(Writing by David Stamp and Deepa Babington, Editing by Rosalind Russell)