Progress in Greek talks as PM demands cabinet resigns

Greece appeared to be moving closer to a deal on naming a new premier and crisis team today, as outgoing Prime Minister George Papandreou demanded the resignation of his ministers to ease the process.

After an emergency cabinet meeting, Papandreou thanked them for their service and "asked the ministers to authorise him to further the procedures with their resignations," state television channel NET reported.

The move seemed to indicate progress in the painful process of appointing a new prime minister at the head of a unity government tasked with implementing a vital EU bailout deal to stave off bankruptcy and keep Greece in the euro.

Former European Central Bank vice-president Lucas Papademos still appeared favourite to accept the poisoned chalice, although a series of demands he made to take the job apparently prevented him from being named yesterday.

Media reports said that Papademos wanted to extend the new government's term to beyond February 19, a date tentatively set for a fresh round of elections, and appoint opposition conservatives to the new cabinet.

The names of two fall-back candidates were also circulating: 69-year-old European ombudsman Nikiforos Diamantouros and Greece's man at the IMF, 64-year-old former finance minister Panagiotis Roumeliotis.

But Papademos, a technocrat who has won international respect for his financial expertise as the right-hand man of former ECB chief Jean-Claude Trichet, was still front-runner, according to the Kathimerini daily.

"Papademos is still very much in the game," it said.

The Athens stock exchange was in high spirits in expectation of a breakthrough, gaining 2.39 percent in midday trading.

The political turmoil in the debt-laden nation has threatened to derail the hard-won EU bailout hammered out last month and raised fears for the stability of the eurozone, with Italy too facing a debt crisis.

NET said late last night that a deal had been clinched but a government spokesman later poured cold water on the euphoria, saying only that the two main parties had found common ground.

"There was positive convergence on the new premier," Elias Mossialos said in a brief statement.

The pressure from Brussels for Greece to get its act together mounted at a meeting of eurozone finance ministers, whose chairman Jean-Claude Juncker said both main parties must put in writing their commitment to Europe.

"We asked the new Greek authorities to send a letter, co-signed by the two parties of the incoming government" to reaffirm Greece's commitment to demands for financial reform under the terms of an EU-IMF rescue, Juncker said.

Even Washington piled on the pressure, with President Barack Obama's spokesman Jay Carney saying: "We urge the government to move as quickly as possible to fulfill the commitments required under its new rescue programme."

And speaking in Moscow earlier, IMF chief Christine Lagarde called for "political clarity", added: "It is the condition needed for any negotiation and for any disbursement" of funds.

European Union nations outside the eurozone also pressed the single currency area today to move fast with a convincing firewall to stop debt contagion endangering the entire 27-nation bloc.

The EU rescue package for Greece agreed after torturous negotiations between governments and banks would give Athens 100 billion euros in eurozone loans, 100 billion in debt reduction and 30 billion in government guarantees.