Papandreou agrees to open talks for a new unity government

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REPORTING FROM ATHENS -- George Papandreou, Greece’s beleaguered prime minister, has accepted an opposition proposal to form a temporary unity government that would secure approval of Europe’s latest bailout plan, senior officials said Thursday.

The interim government would shepherd the bailout plan through parliament and then hold early elections, the officials said. Significantly, Papandreou would have to step down and not head the interim administration.

Anna Diamantopoulou, the Greek education minister, said Papandreou was prepared to accept the proposal from Antonis Samaras, head of the conservative New Democracy party, for a unity government.

Earlier, Papandreou said he would scrap his controversial bid to hold a referendum on the bailout plan and on Greece’s membership of the Eurozone. In an address to members of his Socialist party in parliament Thursday evening, he said the referendum was no longer necessary now that opposition lawmakers were willing to help pass the new bailout plan after originally balking at it.

‘I applaud this different position adopted by the New Democracy party. Hopefully it can mark the start of a new political culture. Society wants it and I’m sure it will applaud it also,’ Papandreou told lawmakers in his speech.

He added that the referendum proposal had ‘offered a positive and creative shock’ to the debate.

It also caused global financial markets to fall and spurred stern warnings from other European leaders, who told Papandreou that Greece risked turning its back on the rest of Europe and going it alone.

Papandreou still faces a confidence vote in parliament Friday, but the new agreement struck with New Democracy makes it more likely he will survive it. However, it would only pave the way for him to step down as Greek leader anyway in favor of a unity government.

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-- Anthee Carassava