ATHENS (Reuters) ? Greek party leaders laboured on Tuesday to agree on a new prime minister, with the rest of the nation and the EU clamouring for an immediate deal on a unity coalition to save the country's finances and end the chaos threatening the euro.
A source at the ruling socialist party said negotiations on getting former European Central Bank vice President Lucas Papademos to lead the interim government were being concluded, but details still had to be ironed out.
There was no word on whether Papademos, a Greek economist who is well known in European capitals, would accept the job.
After early signs that a coalition could be formed quickly, momentum seemed to be lost in the drive by the socialist and conservative parties to create a government that will rule only three months.
The socialist source insisted progress was being made on the "100 day government", which must push a 130 billion euro ($180 billion) bailout for Greece through parliament before calling elections in February.
"Negotiations are being finalised with Papademos as PM," the party source, with knowledge of the talks, told Reuters. "They are going through the final details."
As national central bank governor, Papademos oversaw Greece's entry into the euro zone in 2002, although its economic and political chaos has now cast doubt on that membership.
Outgoing Socialist Prime Minister George Papandreou told his cabinet he hoped to have the name of a new prime minister by Tuesday night, a government source said, prolonging the agony for the Greek people desperate for political stability.
Deputy tourism minister George Nikitiadis denied the negotiations were losing pace. "I have the opposite feeling, that everything is going very well, things are going to be fulfilled pretty soon and we will start working in the next days with stronger momentum."
BROKEN PROMISES
"A national unity government, right now," Ethnos daily said on its front page. "The country and society cannot endure this any more."
European Union politicians expressed their alarm in Brussels about how debt crises in Greece and Italy are shaking international confidence.
"Europe is running dry on credibility and a solution to a high debt crisis must be lower debt. The responsibility for that falls with the country with high debt and that is obviously Greece and Italy," Swedish Finance Minister Anders Borg said.
Greece has repeatedly made promises to deal with its huge budget deficit and debt, only to fall short of fulfilling them, leading to exasperation in Brussels and EU demands that the new government spell out in writing precisely what it will do.
If Greece pushes through its euro zone bailout, it will indeed lower its debt but not only by exercising budget discipline: the bailout envisages a bond swap which will halve the value of banks' holdings of Greek government debt.
Ordinary Greeks also demanded a new government, replacing a socialist administration which descended into chaos.
"If this government doesn't work out, we are lost," said Panagiotis Dimitriadis, 80, a public sector pensioner.
Dimitriadis has had his pension cut as the outgoing government imposed austerity demanded by Greece's international lenders, but he is still trying to help out his son and seven grandchildren.
Papandreou and New Democracy chief Antonis Samaras agreed on Sunday that the coalition should be formed, but little else.
FRUSTRATION IN BRUSSELS
Frustration was also apparent in Brussels where officials said the new government had to show it was serious about implementing promises Athens has made to its EU and IMF lenders in return for the bailout agreed last month.
"It is essential that the entire political class is now restoring the confidence that had been lost in the Greek commitment to the EU/IMF programme," said EU Economic and Monetary Affairs Commissioner Olli Rehn.
Papandreou caused chaos last week by calling a referendum on the bailout, a vote which would might have seen Greeks reject the package because of the austerity measures tied to it. Papandreou backed down, but was forced into agreeing to make way for the unity coalition.
Weary of broken promises from Athens, Rehn said the coalition must "express a clear commitment on paper, in writing, to the EU/IMF programme".
The stakes could not be higher. Greece faces bankruptcy in December when big debt repayments are due, unless it can get hold of more emergency funding soon.
For two years the EU has laboured to solve the problems of Greece, a very small part of the bloc's economy, leading to doubts about how it would manage if the debt crisis engulfed the far bigger Italian or Spanish economies.
(Additional reporting by Dina Kyriakidou, George Georgiopoulos, Renee Maltezou, Tatiana Fragou and Angeliki Koutantou in Athens; Juliane von Reppert-Bismarck in Brussels; Writing by David Stamp; Editing by Peter Graff)
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