Virginia Mayo, Associated Press
ATHENS, Greece — Power-sharing talks between Greece's two main political parties entered their second day Tuesday, as European leaders stepped up the pressure for a quick resolution by holding back a vital rescue loan that the country needs to prevent a devastating bankruptcy.
Socialist Prime Minister George Papandreou and conservative party head Antonis Samaras have been wrangling over who will lead an interim government that aims to secure a new €130 billion ($179 billion) European rescue package, agreed less than two weeks ago.
The wrangling comes as Greece's European partners press for a swift resolution.
Jean-Claude Juncker, the chairman of the eurozone's finance ministers, said Monday that the leaders of the two main parties must co-sign a letter reaffirming their commitment to Greece's bailouts and economic reforms before the next batch of cash from the first bailout, worth €8 billion ($11 billion), is handed over to Athens.
Without the funds, Greece will default before Christmas, sending shockwaves through Europe's banking system and potentially pushing the global economy back into recession.
Papandreou and Samaras reached a landmark agreement late Sunday for Papandreou to step down and the temporary government to be formed.
The two main candidates being considered as interim premier are former European Central Bank Vice President Lucas Papademos and European Ombudsman Nikiforos Diamantouros, officials with knowledge of the negotiations told The Associated Press. They asked not to be identified, citing the sensitivity of the talks.
None of the people being considered have been announced publicly.
The new prime minister would serve until an early election is held next year, with the most likely date being Feb. 19, the finance ministry has said.
The talks between the two leaders come after last week's political crisis in the wake of Papandreou's announcement to put the recently-negotiated debt deal to a referendum. He withdrew the plan Thursday following anger from European leaders, an open revolt from within his Socialist party and turmoil in the financial markets.
Papandreou, half way through his four-year term, has said he will step down after a power-sharing deal is reached.
An agreement on who will lead the new government had been expected Monday, but telephone negotiations between Papandreou and Samaras had produced no public announcement by Tuesday morning. Some officials had expected a result before a Cabinet meeting Papandreou was to chair early in the afternoon.
"When trust, honesty and sincerity prevails in relations between political parties, then the outcome is better for the people, the country, and of course the European Union," Civil Protection Minister Christos Papoutsis said as he headed into the Cabinet meeting.
After Papandreou's referendum announcement, the country's international creditors froze the critical installment. Frustrated with the political turmoil in Greece, they have maintained the pressure even after the public vote idea was officially canceled.
Greece has survived since May 2010 on a €110 billion ($150 billion) rescue-loan program from its eurozone partners and the International Monetary Fund, but all agree it's not enough. A second rescue package has been created which involves private bondholders who have agreed to cancel 50 percent of their Greek debt.
Though Greece has been locked out of long-term bond markets because of excessively-high interest rates, it has maintained a limited present in the market for short-term cash.
It raised €1.3 billion in 26-week treasury bill auction Tuesday, with the sale producing a yield of 4.89 percent, only marginally higher than the 4.86 percent interest rate from a similar auction on Oct. 11. Tuesday's sale was 2.91 times oversubscribed, up on October's equivalent 2.73.
In return for its bailout cash, Greece has endured 20 months of punishing austerity measures. The efforts by Papandreou's government to keep the country solvent have prompted violent protests, crippling strikes and a sharp decline in living standards for most Greeks.
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