(Reuters) – Greece’s conservatives expect to be able to form a coalition government with the Socialists on Tuesday, allowing the two parties that dominated politics for decades to share power despite a major anti-establishment election vote.
Conservative New Democracy leader Antonis Samaras has promised to negotiate less punishing terms for Greece’s international bailout, after only narrowly beating a radical left-wing party that campaigned to scrap the austerity deal entirely.
A senior New Democracy official expected agreement soon on a new cabinet with the PASOK Socialists and possibly another smaller centre-left party following Sunday’s election, the second in as many months.
Speaking late on Monday, he said a deal would be reached on Tuesday that would involve more than a symbolic involvement by PASOK in the government.
“They will participate actively,” said the official, who declined to be identified.
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.
“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.
The comment underscored the widespread expectation in Greece that a new government will be able to negotiate an easing in the tough conditions of the European Union and International Monetary Fund bailout despite resistance from Germany.
Many Greeks hold both parties responsible for the nation’s near bankruptcy, which forced it to take bailouts from the European Union and IMF in 2010 and again this year.
New Democracy narrowly won the election, averting the immediate risk of a Greek euro zone exit but raising doubts on whether the new government can impose austerity cuts on a nation deeply divided over the price for bailout funds.
After claiming victory over the radical leftist SYRIZA party to jubilant crowds, Samaras began on Monday the more sobering task of talking to rivals to cobble together a coalition.
The greatly weakened PASOK, which finished third in Sunday’s vote, has yet to commit to supporting Samaras, but its leader Evangelos Venizelos said talks must be wrapped up by Tuesday – signaling a deal would be agreed by then.
The smaller, moderate Democratic Left party, which opposed the bailout backed by the conservatives and the Socialists, has also suggested it will offer conditional support to a government led by Samaras.
Venizelos was due to meet the head of Democratic Left, Fotis Kouvelis in the morning to gauge support for a three-way alliance with their traditional conservative rivals.
With Greece just weeks away from running out of cash and a new government needed to negotiate the next installment of funds from lenders, Greek political leaders appeared determined to avert the deadlock that followed an inconclusive vote on May 6.
“I am optimistic that this time they will agree to form a government,” a Greek banker who declined to be named told Reuters. “They have realized that there is no margin of error or further delays. A third election would be a disaster.”
With New Democracy taking a 50-seat bonus under Greek electoral law for coming first, 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.
NATION IN CRISIS
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 promised Greeks and prospective partners that he would water down the painful terms of the EU/IMF bailout.
“We will simultaneously have to make some necessary amendments to the bailout agreement in order to relieve the people of crippling unemployment and huge hardships,” he said.
Samaras campaigned on promises to cut taxes as well as raising 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 but also ask its creditors to spread 11.7 billion euros ($14.7 billion) of further austerity cuts over four years instead of two.
But any attempt to veer off the prescribed austerity path would not sit well with European partners already irritated by what they see as the slow pace of Greek reform. Germany, Europe’s paymaster, has ruled out more than minor delays to some targets in the 130-billion-euro rescue package.
Chancellor Angela Merkel said at a meeting of G20 leaders in Mexico that any loosening of Greece’s agreed reform promises would be unacceptable and reiterated that Athens had to stick to its commitments.
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 previous election on May 6.
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(Writing by Deepa Babington; Editing by Will Waterman)