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Sunday's vote 'will probably ease fears of an imminent Greek euro exit', said Martin Koehring, of the Economist Intelligence Unit.

Sources in the centre-Right New Democracy party, which narrowly won Greece's re-run elections on Sunday, last night said a coalition deal had been reached.

The once-mighty PASOK, now reduced to third place after the dramatic rise of the leftist anti-bailout party SYRIZA, said it would support Mr Samaras.

With nearly 100 per cent of ballots counted in the election, a re-run of a poll on May 6 that left no party able to form a government, New Democracy had won 29.7 per cent of the vote, ahead of SYRIZA on 27 per cent, and PASOK on 12.3 per cent.

Speakingon his arrival at Los Cabos for the G-20 talks, Spanish Prime Minister Mariano Rajoy greeted the election outcome as 'good news for Greece, very good news for the European Union, for the euro and also for Spain'.

The smaller, anti-bailout Democratic Left party was also due to decide today whether it would back the conservatives.

PASOK officials said today that the meeting would decide how they would support Samaras - whether by participating fully in government, or by voting with the coalition in parliament.

The new government may get some help from eurozone peers, relieved that SYRIZA had not won and set Greece on course for a euro exit with incalculable consequences for the rest of the 17-member bloc.

Mr Samaras said Greece would fully meet its commitments but added: '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.'

'We're ready to talk about the timeframe as we can't ignore the lost weeks, and we don't want people tosuffer because of that,' he told German radio today.

'The new government must deliver a positive development soon - an easing of the bailout terms or a positivesign in the economy - or people will lose trust in a week.'

SYRIZA, which had promised to tear up the bailout deal signed in March with the European Union and International Monetary Fund, scored strongly in the election.

The bailout is back on: Hopes rise for future of the euro as Greeks stumble to fragile coalition

But the deal that evaded Mr Samaras after first elections on May 6 looks more attainable this time.

A 50-seat bonus automatically given to the party that comes first would give a theoretical New Democracy-PASOK alliance 162 seats in the 300-seat parliament, enough for a majority broadly committed to the €130billion bailout.

Stalemate: Alexis Tsipras, leader of radical left Syriza party, takes to the podium yesterday to vow to continue the fight against Greece's crippling austerity measures

Italian Prime Minister Mario Monti said the poll outcome augured well for the future of the European Union and eurozone countries but added that Athens must move quickly to form a new government,ugg boots for men.

Party leader Alexis Tsipras promised to continue its opposition to the painful austerity measures demanded of Greece.

'The result showed people want the euro, but society remains divided. SYRIZA will be a militant opposition,possibly complicating the new government's efforts,' a senior New Democracy official said.

The deal followed negotiations between party leaders and international pressure on Athens to finally secure a coalition. The country has been without a government since May 6.

'I don't think anything good will come out of these elections,' said Dinos Arabatzis, a 56 year-old taxi driver who voted for New Democracy.

'Whoever is in power now will get burned. Samaras will get burned, and Tsipras will come out much strongerif we go to elections again - that's what worries me,' he said.

Asian stock markets climbed early on the news, as did those in Greece.

A Greek exit would have potentially catastrophic consequences for other ailing European nations, while the fallout would hit the US and the entire global economy.

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In deep recession, crushed under its huge public debt and forced to slash public spending and hike taxes repeatedly, Greece is struggling to restore its near-bankrupt economy, and a new government could face new protests after taking office.

However, they have offered no prospect of any major overhaul of the bailout agreement, which requires Greece to find €11.7billion in spending cuts in June to qualify for the next loan instalment.

By suggesting they could form an alliance, the pro-bailout political parties have given the 17-nation eurozone hope that the single currency may be saved.

BothSpain and Italy saw their borrowing costs rise to near unsustainable levels as investor jitters about a possible Greek exit from the eurozoneintensified the currency bloc's debt crisis in the weeks leading up to the rerun Greek election.

Monti, whose comments were aired on Italian television, said he was very pleased with the the victory of theNew Democracy party.

VIDEO: Samaras receives mandate to form government

'Iam totally convinced that this strengthens the euro. The euro project is irreversible and we must continue to make progress on it.'

'For this government to last it has to show results. You can't continue with 50 per cent youth unemployment and a fifth straight year of recession,' he said.

With 99.95 per cent of the ballots counted so far, New Democracy has 29.66 per cent, followed by the Syrizaradical left coalition at 26.89 per cent.

But he added: 'The key question is how quickly can a government be formed?'

'We hope that a strong government can be formed which confirms the commitments made with the EU,' he said.

More worryingly, Italian and Spanish borrowing costs rose strongly with yields on Spain's 10-year bonds at dangerously high levels of over 7 per cent with equivalent Italian debt over 6 per cent.

The EU 'is convinced that continued fiscal and structural reforms are Greece's best guarantee to overcome the current economic and social challenges', it said in a statement.

Greece has enough funds only last fora few weeks without more aid but European partners have become deeply suspicious of the commitment of Greek politicians to implementing unpopular austerity measures.

With 129 of Parliament's 300 seats, MrSamaras' New Democracy party lacked enough MPs to govern alone, and sought allies among the pro-bailout Socialists, who came third.

Leaders of Italy and Spain, two countries at the centre of contagion fears in the eurozone debt crisis, today welcomed the Greek election result as good news for Europe.

Monti said Greeks had understood the importance of the EU, even if under difficult circumstances.

'SYRIZA will be a very powerful opposition party and when we have elections again - which we will - it will be even stronger, if not first.'

With the Socialists' backing he would control 162 seats, and could seek a further boost from the small Democratic Left party, which, while opposing the country's harsh austerity programme, has said it will do what is needed to help form a strong government.

Leaders of the European Union appeared relieved that a pro-austerity government could now be formed.

The extreme far-right Golden Dawn party, whose members have been linked with violent attacks on African and Asian immigrants, came fifth with 6.92 per cent - winning 18 seats, down from the 21 it elected on May 6.

The deal will resolve six weeks of turmoil which has left Greece effectively ungoverned after initial elections produced an inconclusive result.

Despite his loss Tsipras, 37, appeared buoyed by the election and rejected calls to join an all-party unity government, saying his party was now the main opposition force andpromising to fight the bailout package.

Mr Samaras met Evangelos Venizelos, the head of the Socialist PASOK party, at 3pm after he received a mandate to form a government from Greek President Karolos Papoulias.

'This allows us to have a more serene vision for the future of the European Union and for the eurozone,' he told reporters in Mexico upon arriving for a G-20 summit.

It means the nation could proceed with its austerity programme and be eligible for bailout money.

Underlining the signs of potential instability, the ultra-nationalist Golden Dawn party took 18 seats, repeating its success of May 6 and confirming its status as a force in Greek politics, carried by an angry mood of public protest.

PUBLISHED:08:25 GMT, 17 June 2012 UPDATED:23:39 GMT, 18 June 2012

However, even if it were granted someleeway, a coalition that won only 40 per cent of the vote would struggle to push through reforms in the face of deep public resentment of repeated rounds of tax hikes and pay and pension cuts.

German Foreign Minister Guido Westerwelle said the substance of the bailout agreement was 'not negotiable', but he said creditors might be willing to offer some flexibility on timing for some of the targets, given the time lost in campaigning.

The FTSE-100 is 0.05 per cent down at 5,475.88; France's CAC 40 is 0.67 per cent down at 3,066.93; while Germany's DAX is 0.13 up at 6,237.66.

In the markets, trust had an even shorter shelf life. Though the FTSEurofirst 300 index rose 1.1 per cent at the open, the index had shed all those gains before two hours were up.

Partners would include centre-Left rivals Pasok and, possibly, the moderate Democratic Left.

It seems the underlying problems in the euro zone brought investors back to earth. The euro's rise also evaporated.

Between them, New Democracy and Pasok could form a 'grand coalition' of 162 seats. The majority needed is 151,uggs at dillards.

'The crisis has been postponed, not necessarily averted,' said Theodore Couloumbis, political analyst and vice-president of Athens-based think-tank ELIAMEP.

Rajoy said he was in favour of European fiscal integration and a banking union. 'It's true that some things take time but it's also true that we need to take steps in the right direction,' he added.

Syriza, which campaigned on a promise to renege on the bailout commitments, has ruled out cooperation with Mr Samaras.

'Obviously I voted for SYRIZA so it could win, but the left is becoming stronger by the day and I'm happy about that,' said Panagiotis Panagiotou, 55, a butcher in central Athenswhose business has been hit by the crisis.

Greece is likely to finally announce a new government today after pro-European parties set aside their differences in a bid to keep the country in the euro.

His attitude has raised fears of a return to the anti-austerity protests that have left parts of Athens scarred by angry graffiti and patrolled by squads of police in riot gear,ugg leather boots.