Greek government in power-sharing talks amid riots

Greece's beleaguered government was in power-sharing talks Wednesday, with the main opposition conservatives negotiating for the resignation of Prime Minister George Papandreou, in an effort to ensure approval of new austerity measures required to avoid bankruptcy.

The talks came as riots against the new cutbacks ripped through central Athens, blanketing the main square outside Parliament with tear gas during a previously peaceful rally by more than 25,000 people. Thirty-six police and thirty civilians were injured, police and medical officials said.

Papandreou's government has faced internal party revolt over a new austerity package that is essential to continue receiving funding from an international bailout and avoid a devastating default which would undermine the future of the eurozone.

Wednesday's chaos triggered a sell-off in global financial markets as investors worried that a default in Greece could hurt banks in other countries in a chain reaction experts predicted would be catastrophic. Yields on the country's 10-year bonds reached new record highs, spiralling to 18.4 percent.

Markets are not confident that Papandreou could win the vote in the 300-seat Parliament, where his majority was trimmed to five Tuesday after one of his deputies rebelled and declared himself an independent. Another deputy has said he will not support the bill, due to be voted on by the end of this month.

European officials have pushed for cross-party support for the measures as they extend to 2015, two years beyond the current government's term in office.

Under such pressure, Papandreou and conservative party leader Antonis Samaras discussed the creation of a power-sharing government to deal with the country's crippling debt crisis during a telephone conversation, an opposition party official told The Associated Press. The official spoke on condition of anonymity because the negotiations were still ongoing.

The official said the conservatives' conditions for participating in a potential grand coalition were that Papandreou leaves his current position as prime minister, and the new government re-negotiate the bailout agreement.

An official close to the prime minister said that because Samaras had no specific proposal during the talks, Papandreou said he would be prepared to discuss a "government of mutual consent" and could agree to step aside as part of a long-term deal. He denied that Papandreou had offered his resignation.

The official also spoke on condition of anonymity because talks were still ongoing.

Several conservative deputies publicly backed the idea of Papandreou handing over his position.

"The most important member of a ship's crew is the captain, and the captain has to go," prominent conservative deputy Theodoros Karaoglou said. "If we joined forces, we could go to our (creditors) together to negotiate and the results of course would be better."

The new bill, worth euro28 billion ($40.5 billion) must be passed if Greece is to continue tapping its rescue loans.

Wednesday's riots broke out and lasted several hours after large crowds gathered outside Parliament and as unions held a general strike to protest the new austerity. Riot police fired repeated volleys of tear gas to push back protesters hurling stones and firebombs.

Cafe tables and chairs lay overturned in the city's main Syntagma Square as trash bins burned. Heavy clouds of tear gas hung over Syntagma Square and side streets. The choking chemicals wafted as far as the presidential mansion behind Parliament, where Papandreou met with the country's president, Karolos Papoulias, to brief him on the severity of the situation.

Papandreou has suffered plummeting approval ratings as well as the internal party revolt.

But the new austerity package must be passed if Greece is to avoid bankruptcy. The country has been dependent for the past year on a euro110 billion package of bailout loans from other European Union countries and the International Monetary Fund to prevent it from defaulting on its debts.