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Greek Leaders in Talks to Form New Government, Italy’s Debt Crisis Grows

George Papandreou, Greece’s prime minister, left, meets with Karolos Papoulias, Greece’s president, center, and Antonis Samaras, leader of Greece’s main opposition New Democracy party, in Athens, Greece, on Nov. 6, 2011. Photo by Angelos Tzortzinis/Bloomberg via Getty Images.

Greek leaders are working to formalize an agreement that would create a new transitional government in light of news this weekend that Prime Minister George Papandreou would resign once the agreement is official. In recent weeks Papandreou had faced mounting pressure to quit, and had called for a referendum on a deal reached by eurozone leaders to avert a default crisis.

Papandreou has held a series of meetings with conservative opposition leader Antonis Samaras and Greek President Karolos Papoulias to hammer out the details of the deal.

According to The New York Times,

“The new unity government, in which the major parties would share power, is widely expected to be led by a nonpolitician and to govern for several months, long enough to carry out the debt deal and pass a budget for 2011. The name of the new prime minister and the composition of the new cabinet are not expected to be announced until Monday, when the leaders will meet again, according to a statement Sunday night by the Greek president, Karolos Papoulias, who moderated the talks on Sunday.”

The transitional government is expected to be in place for 15 weeks — during which the 130-billion euro deal will likely be passed — and then elections will be held.

Lucas Papademos, a former vice president of the European Central Bank, is seen as one of the leading candidates to be interim leader. Formal announcements are expected later Monday.

Compounding the domestic political turmoil in Greece, Italy’s borrowing rate reached a record high of 6.64 percent Monday, Prime Minister Silvio Berlusconi is facing political battles of his own, though he rejected speculation that he too would step down. The third-largest economy within the eurozone has a debt burden of 118 percent of its GDP.

Bloomberg describes the political hurdles Berlusconi is facing:

“Berlusconi is struggling to keep his allies in line after key lawmakers announced defections before key parliamentary votes in coming days. The premier plans to stake the survival of his government in a confidence vote next week on implementation of measures pledged to the EU that aim to boost growth and trim the region’s second-largest debt. The first test comes tomorrow on a normally routine vote to rubber-stamp last year’s budget report that may indicate whether Berlusconi still has a majority in the 630-seat Chamber of Deputies.”

We’ll have more on the debt crisis in Europe on Monday’s NewsHour.

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