Greece’s conservatives and socialists edged toward a deal on a new government Tuesday that would seek concessions from the country’s lenders on its punishing austerity program, and the eurozone signaled it was ready to negotiate.
Socialist leader Evangelos Venizelos said his PASOK party would “whole-heartedly” support a government led by the conservative New Democracy party, which narrowly won elections Sunday, and would decide Wednesday precisely how.
“As we stand now, it [a government] could be formed by midday (0900 GMT) tomorrow,” Venizelos said in a televised statement.
Such an alliance would bring together rival parties which alternated in office from the fall of military rule in 1974 until last year, when Greece’s economic crisis forced them to share power in a short-lived national unity government.
The small center-left Democratic Left party was expected to take part.
All three parties want to soften the terms of the EU/IMF rescue deal which is keeping the country from bankruptcy, faced with rising social tensions and an emboldened anti-bailout opposition after more than four years of recession and with unemployment at almost 23 percent.
Eurozone paymaster Germany, the biggest contributor to the rescue, opposes major changes to an austerity drive that has worsened Greece’s economic depression.
But a senior eurozone official said Tuesday that trying to enforce the original terms of the 130 billion euro ($165 billion) bailout as the Greek economy slides deeper into trouble would mean “signing off on an illusion.”
New Democracy leader Antonis Samaras, who narrowly beat the radical leftist SYRIZA bloc Sunday, has called for a two-year extension to the 2014 deadline set for Greece to meet budget targets under the bailout package. He also campaigned on promises to cut taxes and raise unemployment benefits and pensions.
Venizelos called for the creation of a “national negotiating team that will deal with revision of the harsh terms of the bailout deal.”
The call followed an election fought largely over whether to stick to the bailout deal or scrap it. SYRIZA argued it was a dead letter, while New Democracy said that to reject it outright would send the country out of the euro and back to the drachma.
With SYRIZA and its charismatic leader Alexis Tsipras defeated, Greece’s European partners indicated they could give a New Democracy-led coalition some leeway after all.
The senior eurozone official said the bailout’s Memorandum of Understanding (MoU) with Athens had to be renegotiated. The official said circumstances had changed in Greece, which lapsed into political paralysis when elections in May produced a stalemate, forcing Sunday’s rerun.
With austerity and privatization programs hit by the paralysis, and tax receipts dwindling as the economy shrinks further, the official dismissed the idea of not revising the deal.
There is still likely to be a big gap between what Greece’s new government asks for, and what its lenders in the European Union and International Monetary Fund would be prepared to give. “The new government must stick to its commitments,” German Chancellor Angela Merkel warned Monday.
SYRIZA’s Tsipras said the talk of renegotiation showed his bloc had been vindicated, and it was just a matter of time before they came to power. “What SYRIZA has been saying all along is that the bailout plan is not viable and cannot go on,” he told Reuters in his first interview since the election. “Now they all recognize this.”
In a sign that Greeks have drawn some confidence that the danger of an immediate departure from the eurozone has lifted, banks reported that some deposits withdrawn in the run-up to the vote appeared to be trickling back.
A new government still faces the prospect of imposing further austerity cuts on a nation divided over the price of bailout funds with SYRIZA, which has been lifted by a wave of public anger against the old parties, in opposition.