Greek conservatives poised to clinch coalition deal

Greece's conservatives said they are poised to form a coalition government with the Socialists, allowing the two parties that dominated politics for decades to share power despite a major anti-establishment election vote.

Conservative New Democracy leader Antonis Samaras promised to negotiate less punishing terms for Greece's international bailout, after only narrowly beating a radical left-wing party which campaigned to scrap the austerity deal entirely.

A senior New Democracy official expected agreement soon on a new cabinet with the PASOK Socialists and possibly another smaller centre-left party following Sunday's election, the second in as many months.

"We are going to clinch a deal tomorrow, we will form a government," the official said late on Monday, declining to be named. "PASOK will participate more than symbolically ... They will participate actively."

New Democracy and PASOK alternated in power from the fall of military rule in 1974 until last year, when Greece's economic crisis forced the archrivals to share power in a pro-bailout national unity government.

Many Greeks hold both parties responsible for the nation's near bankruptcy, which forced it to take bailouts from the European Union and IMF in 2010 and again this year.

New Democracy narrowly won the election, averting the immediate risk of a Greek euro zone exit but raising doubts on whether the new government can impose austerity cuts on a nation deeply divided over the price for bailout funds.

After claiming victory over the radical leftist SYRIZA party to jubilant crowds, Samaras began on Monday the more sobering task of talking to rivals to cobble together a coalition.

The greatly weakened PASOK, which finished third in Sunday's vote, has yet to commit to supporting Samaras, but its leader Evangelos Venizelos said talks must be wrapped up by Tuesday - signalling a deal would be agreed by then.

The smaller, moderate Democratic Left party, which opposed the bailout backed by the conservatives and the Socialists, has also suggested it will offer conditional support to a government led by Samaras.

With Greece just weeks away from running out of cash and a new government needed to negotiate the next installment of funds from lenders, Greek political leaders appeared determined to avert the deadlock that followed an inconclusive vote on May 6.

"I am optimistic that this time they will agree to form a government," a Greek banker who declined to be named told Reuters. "They have realised that there is no margin of error or further delays. A third election would be a disaster."

With New Democracy taking a 50-seat bonus under Greek electoral law for coming first, a New Democracy-PASOK alliance would have 162 seats in the 300-seat parliament. Adding the Democratic Left would give it a 179-seat majority.