INTERVIEW - EU steps up pressure for Greek national unity government

PARIS Sun Nov 6, 2011 6:42pm IST

European Economic and Monetary Affairs Commissioner Olli Rehn talks to the media ahead of the eurozone finance ministers meeting in Luxembourg October 3, 2011. REUTERS/Francois Lenoir/Files

European Economic and Monetary Affairs Commissioner Olli Rehn talks to the media ahead of the eurozone finance ministers meeting in Luxembourg October 3, 2011.

Credit: Reuters/Francois Lenoir/Files

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PARIS (Reuters) - The European Union stepped up pressure on Sunday for Greece to establish rapidly a national unity government to implement a new bailout programme, saying Athens' continued membership of the euro area was at stake.

EU Economic and Monetary Affairs Commissioner Olli Rehn told Reuters: "We have called for a national unity government and remain persuaded that it is the convincing way of restoring confidence and meeting the commitments."

Greece had breached confidence with its euro zone partners last week and had put itself on a path towards leaving the single currency, but now appeared to be on its way back from the brink, he said.

"Work has been going on in Athens to mend that confidence and we need a convincing report on this by Finance Minister (Evangelos) Venizelos tomorrow in the Eurogroup," Rehn told Reuters in a telephone interview. The 17 euro zone finance ministers meet in Brussels on Monday evening.

His comments came after conservative Greek opposition leader Antonis Samaras demanded that socialist Prime Minister George Papandreou resign before he was prepared to discuss a transitional government leading to elections.

Rehn insisted that the current parliament must first endorse the new bailout plan and implementation measures so Greece can receive the next instalment of urgently needed international loans.

The Greek government has said it will run out of money in mid-December, when it faces the next big bond redemptions, unless it receives an 8 billion euro aid ($11 billion) tranche originally due last month.

"It is essential that all the major political forces commit themselves both to the negotiation of the second programme, including the debt reduction by the private sector, and endorsing in the parliament the new progamme as well as the concrete measures needed to implement it," he said.

Rehn said Athens' European partners "faced last week a breach of confidence by Greece which meant that Greece took itself on a course that would lead it outside the euro zone.

"We do not want that but we must be prepared for every scenario, including that one, for the sake of safeguarding financial stability and saving the euro."

French President Nicolas Sarkozy and German Chancellor Angela Merkel summoned Papandreou to Cannes last week after he called for a referendum on the bailout plan agreed with euro zone leaders on Oct. 27, sparking panic in financial markets. They told him Greece would not receive a cent in extra aid until it upheld its commitment to the EU.

Papandreou subsequently withdrew the referendum proposal and signalled he would quit if a national unity government was established to implement the bailout programme. Samaras on Sunday rejected any compromise while Papandreou remains prime minister.

(Writing by Paul Taylor)

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