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Greek cabinet set for first meeting since poll upset

Greece's new radical left-led government prepared to meet on Wednesday for the first time to hammer out a strategy for renegotiating the country's giant bailout, after storming to power on a promise to reject years of harsh austerity policies.

[ATHENS] Greece's new radical left-led government prepared to meet on Wednesday for the first time to hammer out a strategy for renegotiating the country's giant bailout, after storming to power on a promise to reject years of harsh austerity policies.

The coalition cabinet, made up of poll winners Syriza and the nationalist Independent Greeks (ANEL), was set to convene at 10:30 am (0830 GMT), three days after Sunday's electoral upset that saw the architects of Greece's sweeping budget cutbacks thrown out of office.

In a sign that the new government will take a hard line in haggling over the 240-billion-euro (S$368 billion) EU-IMF package with international creditors, 40-year-old Prime Minister Alexis Tsipras on Tuesday named left-wing economist Yanis Varoufakis as finance minister.

A polyglot academic, 53-year-old Varoufakis, is a vocal critic of the conditions imposed by creditors in return for the 2010 bailout and he argues the country's shattered economy will never recover until they are relaxed.

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Analysts have described Syriza's coalition with ANEL as "unnatural" and potentially short-lived, saying that the smaller party is unpredictable and that the two parties differ starkly on immigration policy.

However, the allies - who together have 162 seats in the 300-member parliament - share a common opposition to the EU-IMF bailout.

Among their first tasks will be addressing an end-of-February deadline set by the EU for Greece to carry out more reforms in return for a seven-billion-euro tranche of financial aid from the 28-member bloc and the International Monetary Fund.

Tsipras, who has vowed to reverse many of the severe spending cuts and other measures that Greece's creditors insist on, must decide whether to prolong the deadline.

Greece's European partners have been quick to pour cold water on the issue of debt forgiveness since Syriza's election win, with German Chancellor Angela Merkel's spokesman saying Monday that Greek membership of the eurozone "means... sticking to its previous commitments". However the European Union's governing body indicated Wednesday that it was willing to show flexibility in working with the new Greek leaders to keep the debt-stricken nation in the eurozone.

The European Commissioner for Economic and Financial Affairs, France's Pierre Moscovici, said he ruled out any "break" between the European Commission and the new Greek administration, the French daily Le Parisien/Aujourd'hui en France reported on Wednesday.

The Commission and the European Union are willing to seek "less intrusive, more flexible forms of cooperation" with Athens, the paper quoted him as saying.

"What we all want is that Greece recovers, creating growth and jobs, that it reduces inequality, that it can deal with the problem of its debt and remains in the euro area," he said.

But in a German newspaper interview on Wednesday, a member of Germany's Bundesbank central bank warned Athens of "fatal consequences" if it rejected the bailout terms.

"If the continuation of the programme of aid for Greece is called into question... Greek banks would lose access to central bank funds," Joachim Nagel told the daily Handelsblatt. "It would have fatal consequences for the Greek financial system." Fears that Greece could be forced out of the eurozone if it defaults on its debt saw the euro briefly hit an 11-year low against the dollar Monday, but it rose on Tuesday.

Syriza claims the stringent conditions attached to the bailout - including wage and pension cuts and widespread privatisations -have caused a "humanitarian catastrophe" in Greece.

It wants to release an immediate 1.2 billion euro package to increase the minimum wage and pensions for the poorest.

The first foreign dignitary to visit Greece since Syriza took power will be the social democrat head of the European Parliament, Martin Schulz, on Thursday.

The IMF extended an olive branch to the new Greek government, saying it was prepared to continue its financial support to the country.

"We stand ready to continue supporting Greece, and look forward to discussions with the new government," IMF managing director Christine Lagarde said in a statement.

Greece's economy is set to emerge from recession after shrinking by a quarter in five years, leaving one in four out of work.

Many Greeks say that even if Tsipras can deliver on a fraction of what he has promised, their lives will improve.

Sunday's poll was Greece's fourth in five turbulent years, including back-to-back votes in 2012.

Tsipras stands alone as Europe's first anti-austerity leader for the moment, but Syriza's victory could inspire other anti-austerity parties, including Spain's Podemos, which has topped several opinion polls and is aiming for an absolute majority in the Spanish election in November.