Greece seals deal on new coalition, PM to step down

Greece's politicians agreed on Sunday to form a unity government to approve a euro zone bailout, with Prime Minister George Papandreou due to step down to break an impasse after the EU demanded its parties join forces to avert bankruptcy.

Discussion on who would lead the new government would continue on Monday, the office of the Greek president said after the European Union gave Greece 24 hours to show how it will enact its 130 billion euro emergency funding package.

"Today was a historic day for Greece," Greek government spokesperson Ilias Mossialos told reporters. A new government would be sworn in and hold a confidence vote within a week if all went to plan, he said.

The two sides agreed February 19 would be the most suitable date for elections, said the finance ministry, where the politicians met to discuss the timeframe for the new government.

Beyond that, Papandreou's agreement with conservative leader Antonis Samaras was thin on details.

"Tomorrow there will be new communication between the prime minister and the opposition leader on who will be the leader of the new government," said the presidency statement.

Papandreou and Samaras -- who were once US college room mates -- had to bury their deep differences and personal animosity, as Greece is deep in economic, political and social crisis, its future in the euro zone is in question, and their reputations among ordinary Greeks are at rock bottom.

"The two leaders had no other choice. If elections were held now, nobody would turn out to vote for them," said Elias Nikolakopoulos, political science professor at Athens University.

"New elections will probably be held at the end of February or early March. They have no time to implement the EU bailout deal before then," he added, speaking before the Feb 19 date was announced.

Brussels has piled pressure on Athens to approve the bailout, a last financial lifeline for Greece, fearing that its crisis will spill into much bigger euro zone economies such as Italy and Spain -- which would be much harder to rescue.

Papandreou and Samaras had been scrambling to reach a deal before finance ministers of euro countries meet in Brussels on Monday, to show that Greece is serious about taking steps needed to stave off bankruptcy.

Earlier, European Economic and Monetary Affairs Commissioner Olli Rehn told Reuters finance ministers from countries that use the single currency would insist on hearing a plan for a unity government from their Greek colleague Evangelos Venizelos at Monday's meeting in Brussels.

"We have called for a national unity government and remain persuaded that it is the convincing way of restoring confidence and meeting the commitments," he told Reuters. "We need a convincing report on this by Finance Minister Venizelos tomorrow in the Eurogroup."

Many Greeks, who have suffered pay and pension cuts and massive job losses in the past two years, remained distrustful about politicians of all colours.

"Elections won't solve any of our problems now. These parties don't represent us anymore," said Michalis Skevofylakas, 47, a teacher.

Papandreou, who heads the socialist PASOK party, and New Democracy chief Samaras are due to discuss on Monday morning who will be the new prime minister. Greek media tipped Lucas Papademos, a former deputy president of the European Central Bank, as a possible candidate.

President Karolos Papoulias, who led the talks that produced Sunday's deal, will summon the head of all leading parties for more negotiations at 1800 GMT on Monday.