Greece Forges Deal on New Coalition Government

Greek Prime Minister George Papandreou and conservative opposition leader Antonis Samaras agreed on Sunday on a new coalition government to approve a euro zone bailout deal before calling elections, the office of the president said.

Papandreou will not lead the new administration, the office said in a statement issued after the European Union gave Greece 24 hours to explain how it will form a unity government to enact its 130 billion euro emergency funding deal.

The two men sealed the deal after talks led by President Karolos Papoulias, but it remained sketchy as they have yet to agree even on who will be the new prime minister to lead Greece

through its economic, political and social crisis.

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

The statement also made no mention of how long the interim government would last before it calls early elections.

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

One political analyst welcomed the deal, struck after doubts began to emerge over whether Greece could stay in the euro zone.

"I'm relieved. It's a very positive development. It was imposed by society and the need to stay in the euro zone, and it will not be overturned," said Costas Panagopoulos, head of ALCO polling agency.

The EU has made clear it wants a unity government in Greece to ensure consensus support for reform and restore confidence after a week that saw Papandreou first call for a referendum on the bailout and then backtrack under international pressure.

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."

(Additional reporting by Lefteris Papadimas, Rene Maltezou and Harry Papachristou; writing by David Stamp; editing by Philippa Fletcher)