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By Alex Spillius, Athens, Bruno Waterfield in Brussels and Henry Samuel in Paris
7:53PM BST 10 May 2012
The first hopes of a coalition government forming in Greece emerged on Thursday night after the leaders of two socialist parties said they would work together in order to keep the country in the euro.
Greece's Socialist leader Evangelos Venizelos, left, talks with Democratic Left leader Fotis Kouvelis at his office at the Greek Parliament in Athens Photo: AP Photo/Dimitri Messinis
After three days of stalemate, Evangelos Venizelos, leader of Pasok, said that he saw the first "good omen" in attempts to forge a government that would avert the looming prospect of a new election.
He spoke after meeting Fotis Kouvelis, leader of Democratic Left, who outlined a proposal for a unity government until 2014 that would strive to keep the heavily indebted country in the single currency and the European Union.
At the same time, it would attempt to negotiate a gradual "disengagement" from the harshest austerity measures of the 130 billion euro bailout.
"Our views are very close," said Mr Venizelos, who will meet other party leaders on Friday to discuss the proposal.
Among those will be Antonis Samaras, the leader of New Democracy, whose support would be indispensable. The centre-Right party holds 108 seats, including 50 for finishing first. With 41 seats for Pasok and 19 for Democratic Left, the three parties together would have more than the simple majority of 151 needed to govern.
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Such a coalition would however suffer a major credibility problem with voters, 70 percent of whom supported parties that promised to tear up the bailout. A new election next month remains a distinct possibility.
Pasok and New Democracy were heavily punished by Greeks for joining forces in a six-month caretaker government to approve the harsh terms demanded by international creditors, and both parties are associated with decades of mismanagement, cronyism and nepotism.
As leader of Europe's most powerful economy and Greece's chief creditor, Chancellor Angela Merkel of Germany shows no signs yet of cutting Athens any slack.
The door to a deal in Greece opened after Democratic Left criticized the Radical Left Coalition, or Syriza, for threats made by its leader Alexis Tsipras to renege on Greece's debt commitments.
"Contradictory statements by Syriza members on the Greek economy, its insistence on cancelling the bailout agreement, complicates political cooperation," the party said in a statement on its website.
Democratic Left had hitherto said it would only join a coalition if it included Syriza, which pulled off a surprise second-place finish in Sunday's election after campaigning on a tough anti-bailout message.
Data released by Marc polling yesterday showed Syriza had gained support rapidly since the fractured verdict of Sunday's vote to become the most popular party with 23.8 percent, hastening the need for other parties to join forces.
Mrs Merkel delivered a stiff warning to both Greece and the new French president Francois Hollande yesterday that "there is no magic bullet" to solving Europe's sovereign debt crisis.
Speaking to a warm reception in Germany's parliament, Mrs Merkel said that "growth through structural reform is important and necessary, growth through debt would throw us back to the beginning of the crisis." The German leader is particularly alarmed that Mr Hollande's plans will overturn Germany's economic doctrine of "fiscal consolidation" by setting a bad example to Greece, Italy and Spain.
German Social Democrats have also been encouraged to threaten to block Germany ratification of the fiscal pact unless Mrs Merkel backs down.
Benoît Hamon, the French Socialist Party spokesman, on Thursday accused the Chancellor of defending a pact that gives an "advantage to the German economy" and that threatens the high standards of social protection beloved by the European Left.
"[The pact] would mean sacrificing the European social model. We consider today that Europe is blocked in a politics of austerity that is failing," he said.