Greek parties sealed a deal to form a conservative-led coalition on Wednesday and said they would start immediately to form a team to re-negotiate the tough austerity conditions in the international bailout propping up the near-bankrupt economy.
"Greece has a government," Evangelos Venizelos, head of the Socialist PASOK party told reporters after talks with conservative leader Antonis Samaras, the winner of Sunday's election.
PASOK, the former ruling party, will back the government in parliament but there was no word on who would serve in the new cabinet. Venizelos said the make-up of the government remained to be fixed and would be discussed by the evening.
Samaras has a three-day mandate to form a government and must reach a deal before evening or risk returning Greece to the uncertainty which followed an inconclusive election on May 6. Samaras is due to meet President Karolos Papoulias at 1300 GMT to tell him he can form a government, a party official said.
An official from one of the three parties in the coalition said that they had agreed to name National Bank Chairman Vassilis Rapanos as finance minister.
The new government will face immediate pressure to try to soften the bitterly resented austerity measures demanded of Greece under a 130 billion euro bailout deal agreed in March with the European Union and International Monetary Fund.
At the same time Samaras must contain the rising social tensions created by the crisis and hold together a coalition with his traditional rivals in the face of Greece's most severe economic test since World War Two.
Democratic Left party members endorsed a motion to back a coalition if a final agreement is reached, but according to party sources refused to place senior politicians in the cabinet, a move which potentially weakens their commitment to the new government.
"We have decided to give a vote of confidence to the government that will be formed," party leader Fotis Kouvelis said after a meeting with Samaras.
"The Democratic Left insists on policies to gradually disengage from the terms of the bailout that has bled society."
PASOK, the former ruling party humbled in the last two elections, had been expected to give its backing to its former rival Samaras but it may also stop short of sending senior leaders of its own to serve in the government.
Greek media reported that Venizelos had clashed angrily with other senior party leaders over his insistence that the Socialists should not put ministers of their own in a cabinet led by the right.
Both center-left parties could nominate technocrats from outside politics to serve in the cabinet but their reluctance to throw their own weight behind the new government may not augur well for the hard battles ahead.
"It will be a very weak coalition," said Nikos Konstandaras, managing editor of leading conservative daily Kathimerini, pointing to the decades of enmity between New Democracy and PASOK, the two traditional giants of Greek politics.
Germany, the eurozone's biggest economy, remains suspicious of Samaras, who switched from opposing the bailout when PASOK was in power to cautious endorsement when the Socialist government began to unravel late last year.
"What is needed is more decisiveness in swiftly implementing the measures which have already been agreed," German Finance Minister Wolfgang Schaeuble told the weekly Die Zeit in an interview.
However European Union officials have signalled that some adjustments are likely to a programme that has slipped behind target in the weeks of political uncertainty following the May election and a deeper than expected recession.
New Democracy only narrowly beat the leftwing Syriza party that wants to scrap the bailout and negotiate a new programme. With Greek society deeply split, a repeat of the violent anti-austerity protests seen last year is a constant threat.
Greek electoral law gives New Democracy a 50-seat bonus for coming first, so an alliance with PASOK would have 162 seats, a majority in the 300-seat parliament. Adding the Democratic Left would give it 179 seats.
The bailout program has so far kept Greece in the euro but has come at the price of deep spending and wage cuts that have sent unemployment to a record high and deepened a recession now into its fifth year.
Fast running out of money, the new government's first mission will be to convince officials from the so-called "troika" of European Union, European Central Bank and International Monetary Fund inspectors to sign off on the next instalment of aid from the bailout.
Underlining the rising poverty levels which the new government will have to confront, hundreds of people turned up in Athens to a free distribution of fruit and vegetables by a farmers' association based on the island of Crete.
"Here we're seeing middle-class people that we never imagined we would see lining up like that," Athens mayor George Kaminis told Antenna TV. "But this is the reality."
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