Papandreou to go, but uncertainty remains

The eyes of Europe, which have been focused on Greece all week, will see a slightly brighter picture today – albeit one still engulfed in heavy fog. The good news: a new coalition government will be formed – the government of “national unity” that EU leaders wanted – to approve the bailout package ahead of new elections.

Prime Minister George Papandreou will step down, following his aborted call for a referendum on the bailout terms last week. His future had been a major part of the uncertainty surrounding Greece: reports of his resigntion on both Thursday and Friday turned out to be premature, if only by a matter of days.

But there’s no word yet on his successor, and if a new PM is not agreed upon before this afternoon – when the EU finance ministers meet in Brussels – it’ll be a sign that the chaos is far from over.

And Greece’s big problem remains: how to implement the austerity required to earn new bailout funds. Elections are likely to be held soon into the new year, so it’s unclear that any measures agreed on by the caretaker government will last. With that in mind, the likes of Merkel and Sarkozy are unlikely to be looking on Greece with much less scepticism this morning.