And on the second day...

The second day of talks on the formation of the new Greek government has so far seen no major surprises. As we predicted in our response to the election results that we put out yesterday, PASOK leader Evangelos Venizelos' refusal to join a 'national unity government'. unless left-wing SYRIZA were on board, for most part turned out to be political posturing. Things now seem to be heading towards a three-party coalition with election winner New Democracy, PASOK and Democratic Left.

The latest developments:

• As widely expected, both SYRIZA and right-wing populist Independent Greeks have said "Thanks, but no thanks" to New Democracy leader Antonis Samaras' offer to take part in the new coalition;

• Samaras also met Venizelos and Democratic Left leader Fotis Kouvelis yesterday. After the meeting, Venizelos insisted that the best solution would be to have a four-party coalition with SYRIZA in, although he stressed that "the country must have a government by tomorrow [i.e. today]";

• Kouvelis suggested that his party was willing to form part of the new government, although he added that he would sign "no blank cheques" to Samaras;

• Venizelos and Kouvelis (in the picture) met this morning. After the meeting, Kouvelis said an agreement is in sight and could be reached "within hours". A tripartite coalition with New Democracy, PASOK and Democratic Left would hold 179 of the 300 seats in the Greek Vouli - which the European Commission and other eurozone countries could see as sufficient to start talking of minor revisions of the Greek bailout programme; 

• Venizelos suggested that, in parallel to the new government, Greece should also set up a negotiating team to discuss the revision of the bailout terms in Brussels. This group, he said, should clearly include SYRIZA - now the second-largest party of the country. However, SYRIZA has dismissed Venizelos' plan as a "publicity stunt"; 

• Meanwhile, there seems to be a bit of confusion on what Greece could actually achieve from the re-negotiation of its bailout terms - which, according to us, will be a couple of minor adjustments but no changes to the thrust of the agreement. A senior European official is quoted as saying, "If we were not to change the [EU-IMF] Memorandum of Understanding we would be signing off on an illusion. There is scope for revision." He added that a new MoU would be signed "during the summer." However, the prompt reply from European Commission spokesman Amadeu Altafaj Tardio is that "nobody is talking about a new MoU". 

• On a slightly separate note, Die Welt notes that PASOK - the party - is actually proportionally in more debt that Greece itself. It owes banks some €130 million - i.e. 18 times its annual income. Election winner New Democracy is also reported to be heavily indebted. This is partly due to the fact that Greek political parties get state funding based on their share of votes in the general elections, and support for PASOK has been shrinking since its last victory in 2009.