Greek Prime Minister George Papandreou has told French President Nicolas Sarkozy that the formation of a coalition government is “imminent”. He is to see President Carolos Papoulias on Wednesday afternoon.

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In a telephone call to the presidential Elysée Palace, Papandreou that "a new government with the support of the ruling majority and the opposition will be set up imminently", Sarkozy's office said in a statement.

Sarkozy "hailed Mr Papandreou's action and looked forward to a broad unity government that will permit the complete implementation by Greece of the 27 October agreement", it said.

Papandreou was due to meet Papoulias at 1500 GMT Wednesday, according to state-run TV Net.

He was expected to hand in his resignation and that of his cabinet, having asked his ministers Tuesday to draft their letters to speed up the process.

Vassileios Skouros, 63, a former European Central Bank vice-president, has emerged as favourite for interim prime minister. Lucas Papademos, 64, the president of the European Court of Justice was earlier tipped to take the post but looked less likely to be named Wednesday. The names of European ombudsman Nikiforos Diamantouros, 69, and 64-year-old former finance minister Panagiotis Roumeliotis, 64, who represents Greece at the IMF, have also circulated.

Talks on a “unity government” of Greece’s two main parties ran into trouble on Tuesday when the right-wing opposition New Democracy party refused to accept a European Union demand that the terms of its bailout be accepted in writing, dubbing it an “insult [to] our national dignity”.

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