Greek parties agree on speaker as new PM

Greek Prime Minister George Papandreou said he was stepping down on Wednesday without saying who would succeed him as the nation heads toward an economic precipice, but party sources said political leaders had agreed it would be the speaker of parliament.

Parties from left and right settled on veteran socialist Filippos Petsalnikos, barring-last minute snags, the sources said, turning to their own political class after ditching a plan to recruit a former top European Central Bank official. In a television address before heading to meet the president, Papandreou wished the new prime minister well without giving any name and declared that Greece had avoided bankruptcy.

It was left to the party sources to give Greeks some idea of who their leader will be until early elections are held in February. They named speaker Filippos Petsalnikos, 60, who founded the PASOK party along with Papandreou's father Andreas, Greece's first socialist prime minister.

However, they warned against taking anything for granted.

"We have agreed on Petsalnikos but things can change between now and when the prime minister sees the president," a source close to the discussions between PASOK and the conservative opposition New Democracy told Reuters on condition of anonymity.

Earlier optimistic reports have proved premature as the parties bickered over who should take the poisoned chalice and lead a government that will impose yet more crippling austerity on an angry electorate.

With Greeks and the European Union clamoring for an end to the game of political cat-and-mouse, the central bank governor earlier made a rare intervention to say a new coalition was imperative for securing a 130 billion euro bailout.

"Political uncertainty has added to the stress facing the economy and the banking system," Bank of Greece Governor George Provopoulos said in a statement.

"Any delay in forming a new government threatens to damage further the country's credibility."

Greece will run out of money next month unless the new government comes to terms with the EU and IMF, Greece's last remaining lenders.

Greece's international lenders had put their faith in a plan for Lucas Papademos, a former vice-president of the European Central Bank, to head the new government as a technocrat and give it the credibility that politicians lost long ago.

But that idea stalled in the small hours, apparently over politicians' refusal to let Papademos pick his own team to tackle Greece's overwhelming debt and budget problems.