Greek parties look to seal coalition

Greece is engaged in second day of coalition talks under pressure from financial markets and world powers after elections won by pro-euro parties that also reflected rising anger against austerity.

The New Democracy conservatives who came first in the elections said they had struck a preliminary agreement with the socialists PASOK to form "a government of national salvation" to rescue Greece from its devastating economic crisis.

PASOK has voiced hope for a deal later on Tuesday but insists that the new government should include other parties including the leftist Syriza, which has already ruled out taking part in any New Democracy-led coalition.

Greece's victorious conservative leader has pledged to soften the debt-laden country's punishing austerity programme despite opposition from Germany.

All the parties in the election wanted a renegotiation of the bailout terms, but differed on the extent.

Samaras says he will honour the agreements Greece made earlier, but wants an easing of the terms of the bailout, "so the Greek people can escape from today's torturous reality".

A brief relief rally on international financial markets after Sunday's Greek vote quickly fizzled out as it became clear that Antonis Samaras's New Democracy had failed to win a convincing popular mandate to implement the deep spending cuts and tax increases demanded by the European Union and the IMF.

Syriza and a host of smaller parties opposed to the punishing conditions attached to the 130 billion euros bailout won around half the votes cast, though fewer seats because the electoral system rewards the first placed party disproportionately. 

Samaras received a mandate to form a coalition government from the president on Monday, and said the country would meet its bailout commitments.

But he said: "We will simultaneously have to make some necessary amendments to the bailout agreement, in order to relieve the people of crippling unemployment and huge hardships."

German Chancellor Angela Merkel warned: "Elections cannot call into question the commitments Greece made. We cannot compromise on the reform steps we agreed."

However, the US said it might support a review of the terms.

US Treasury Under Secretary for International Affairs Lael Brainard said: "We can expect to see on the part of the European partners and the IMF recognition that Greece's programme has gone off track for some period of time, in part because they had a protracted political process and have not had a government."

Two international bailouts have been awarded to Greece, an initial package worth 110 billion euros in 2010, then a follow-up last year worth 130 billion euros, but they come with tough austerity measures attached.