ATHENS, Greece — A new Greek interim government will be announced this afternoon, a government official said, after critical power-sharing talks between the country’s two main parties dragged into a third day despite intense European pressure.
Negotiations between Prime Minister George Papandreou and opposition leader Antonis Samaras began Monday to resolve a political crisis that is threatening to cut Greece’s loan lifeline and could even force it out of the euro — in an ignominious first for the 17-member currency union.
The two reached a historic weekend agreement to forge an interim government that will shepherd the country’s new $179 billion European rescue package through Parliament. Approval of the deal will allow the release of a $11 billion loan installment, without which Greece will go bankrupt before Christmas.
The squabbling in Athens came as a far more serious threat emerged to the euro, with the borrowing costs of one of Europe’s largest economies hitting historic highs amid a government crisis in Rome.
Italian Premier Silvio Berlusconi announced he would resign after Parliament passes economic reforms demanded by the EU to keep Italy from sinking into Europe’s debt mess.
Papandreou has already agreed to step aside once a power-sharing deal is reached.
Both Mediterranean nations are under heavy pressure to reassure financial markets that the 17-country eurozone is moving quickly to reduce crippling government debts before they break apart the monetary union and plunge the world into a new recession.
