National unity cabinet seen in Greece as pressure mounts

World powers urged Greece to move quickly as coalition talks on Monday inched towards a possible national unity cabinet after pro-euro parties won an election that also revealed deep anti-austerity anger. The Harvard-educated conservative leader Antonis Samaras won the election with his New Democracy party and eased global fears that Greece could crash out of the euro, with a promise to respect the country's international engagements. Financial markets were still on the alert however after coalition talks following an election last month collapsed, triggering Sunday's vote. Analysts warned that a stand-off with Greece's creditors could also be on the cards. "The country cannot remain ungoverned even for an hour," President Carolos Papoulias said as he gave Samaras a three-day mandate to form a government. Following several rounds of coalition talks, the 61-year-old Samaras, a former foreign minister, said he had struck a preliminary agreement with the socialist Pasok party to form "a government of national salvation" by Wednesday. But Pasok leader Evangelos Venizelos insisted that any new government should include other leftist parties such as the radical Syriza, which garnered around a quarter of the vote with its promise to tear up an EU-IMF bailout deal. Second-placed Syriza has ruled out joining a coalition led by New Democracy. Samaras's conservatives won 129 of the 300 parliamentary seats in Sunday's historic vote, Syriza won 71 seats, Pasok 33, Independent Greeks 20, the neo-Nazi Golden Dawn 18, Democratic Left 17 and the Communist Party 12. Analysts say a coalition of New Democracy, Pasok and the Democratic Left is the most likely outcome, although Democratic Left leader Fotis Kouvelis said after meeting with Samaras that he was not ready to sign "a blank cheque." Analyst Yiannis Loulis warned that any new government would be "fragile" and some analysts say that even with pro-bailout parties in power there is potential for a confrontation with Greece's international creditors. Samaras has promised to respect Greece's international engagements but also said on Monday that there should be amendments to the harsh conditions of the bailout deal "so the Greek people can escape from today's torturous reality". Key EU player Germany has said there could be an extension of a deficit deadline but New Democracy's campaign promises appear to go further, including a reduction in property and sales taxes and a freeze in pension and salary cuts. "Elections cannot call into question the commitments Greece made. We cannot compromise on the reform steps we agreed on," German Chancellor Angela Merkel warned in the Mexican resort of Los Cabos just ahead of the G20 summit. Also at that summit US President Barack Obama said the election result was a "positive" sign for Greece to work "constructively with their international partners in order that they can continue on the path of reform". Greece has been forced to seek bailouts twice after hiding the extent of its debt woes, first for 110 billion euros in 2010 and then for 130 billion euros earlier this year. It has also had a 107-billion-euro private debt write-off. The eurozone is hoping the result can draw a line under a lengthy period of uncertainty that has unsettled markets. World markets initially rallied after the result and the euro rose against the dollar but those gains quickly petered out. In foreign exchange deals on Monday, the euro was just up, at $1.2648 from $1.2644 late on Friday in New York. The Athens stock exchange hit seven percent before closing 3.64 percent higher at 580.67 points. Sunday's election was the most critical for Greece since the end of military rule in 1974 and was particularly significant for Europe as Greece is where the debt crisis kicked off in 2009 before spreading across the continent. Any new government in Greece faces daunting economic challenges in a country where unemployment is at 22.6 percent, and a tricky political balancing act between pressure from the streets and from the global financial community. "This should be a new beginning. It should be a new beginning on how the bailout programme should be put together," said Spiros Rizopoulos, a political commentator and head of Spin Communications agency in Athens. "I don't want to get stuck in something that I am going to have to be paying off for the rest of my life as I starve just for the sake of having the euro. "We need a development plan that is going to help us to create wealth to pay off with respect and dignity the money we owe," he said.