Greek parties seek coalition deal, bailout revision

ATHENS (Reuters) - Greek political parties meeting on Tuesday said they expected to form a coalition government soon and then seek concessions to the painful austerity measures tied to the international bailout deal keeping the country from bankruptcy.

Conservative New Democracy leader Antonis Samaras, the winner of Sunday's election, has promised to negotiate easier terms for Greece, backed by likely coalition partner Evangelos Venizelos, head of the Socialist PASOK party.

"Greece must and will have a government as soon as possible," Venizelos said after a meeting with Fotis Kouvelis, head of the small Democratic Left party as part of talks to form a cross-party government with New Democracy.

"There is a need to form a national negotiating team that will deal with revision of harsh terms of the bailout deal."

However, hopes that the government may be in place by the end of the day appeared to fade after Kouvelis, whose party opposed the bailout deal in the election campaign, said several points still needed to be negotiated and agreement might take longer.

"There will be a government, but I don't know if it will be formed by tonight. I believe we will have reached an agreement by the end of the week," he told reporters.

Earlier, a senior New Democracy official said he expected that a deal with PASOK would be reached by Tuesday. Samaras, who has three days to form a coalition before his mandate runs out, is due to hold further meetings during the day.

New Democracy and PASOK alternated in power from the fall of military rule in 1974 until last year, when Greece's economic crisis forced the arch rivals to share power in a pro-bailout national unity government.

But PASOK support has plunged this year, leaving it a distant third behind New Democracy and the leftist SYRIZA party, which wants to cancel the austerity measures in the bailout package and negotiate a new "national recovery plan".

There has been a marked shift of tone since the election as leaders of the parties that had previously broadly supported the bailout have talked openly about easing the tough conditions demanded by the European Union and International Monetary Fund.

European partners, notably from the bloc's biggest economy Germany, have held out the prospect of extending some payment deadlines but they have repeatedly insisted that the basic conditions of the deal cannot be renegotiated.

"The new government must stick to its commitments, which the country has agreed on," German Chancellor Angela Merkel said at a meeting of leaders from the Group of 20 major economic powers.

A senior euro zone official, speaking on condition of anonymity, said the terms of the deal were "changeable" and could be "adapted", but there were different opinions in the euro area and in Greece on the scope of such changes.

In a sign that Greeks themselves have taken some confidence from the election, banks reported that some deposits withdrawn in the run-up to the vote appeared to be trickling back.

"We didn't have any deposit outflows yesterday, and we are expecting a similar picture today," said one banker, speaking on condition of anonymity. "The election result helped. On the contrary, we had small inflows of up to 10,000 euros from people who kept cash at home."

MORE CUTS

New Democracy took a 50-seat bonus under Greek electoral law for coming first, and a New Democracy-PASOK alliance would have 162 seats, a majority in the 300-seat parliament. Adding the Democratic Left would give it 179 seats.

Its victory averted the immediate risk of a Greek exit from the euro zone but a new government still faces the daunting prospect of imposing further austerity cuts on a nation deeply divided over the price for bailout funds.

PASOK has yet to commit formally to supporting Samaras and wants to include SYRIZA in a broad-based unity government of all the parties. Venizelos had said talks must be wrapped up by Tuesday.

With Greece just weeks away from running out of cash and a new government needed to negotiate the next instalment of funds from lenders, Greek political leaders are under heavy pressure to avoid a repeat of the deadlock seen after a first and inconclusive election on May 6.

"Political leaders should be aware of the fact that this government is Greece's last chance to remain in the eurozone," the centre-left daily Ta Nea said in an editorial.

"The Greek people are ready to reward the parties that manage to ease austerity and punish those that raise voices of dissent," it said.

A difficult road lies ahead for Samaras, a U.S.-educated economist who went to college with former Socialist Prime Minister George Papandreou.

He inherits a nation in deep social and economic crisis, with an economy in its fifth year of a recession that has left one in five workers out of a job. A rising number of businesses are closing down, the number of homeless on the streets is growing, and anger at austerity cuts is at boiling point.

Samaras, who broadly accepted the bailout during the campaign, promises to cut taxes as well as raise unemployment benefits and pensions.

The New Democracy official said the new government would aim to accelerate and broaden a privatization program to top up state coffers, but also ask its creditors to spread 11.7 billion euros ($14.7 billion) of further austerity cuts over four years instead of two.

With an emboldened SYRIZA bloc led by former communist student leader Tsipras at the head of a powerful opposition, the new government could face protests soon after taking office. SYRIZA almost doubled its share of the vote since the May election.

($1 = 0.7949 euros)

(Writing by Deepa Babington and James Mackenzie; Editing by Will Waterman)

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