Europe Stocks Seen Higher, Greeks Reach Coalition Deal

European stocks were called to open higher on Monday after Greek politicians agreed to form a new coalition to deal with the nation's debt, but investors remain nervous over the euro zone's ability to resolve the sovereign debt crisis and events in Italy.

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The FTSE is called 31 points higher, the DAX in Frankfurt is expected to open up by 24 points and the CAC 40 is called higher by 16 points.

Greece responded to EU calls to come up with plans for a new government to tackle the nation's spiraling debt, by announcing late on Sunday that a new coalition would be formed with the conservative opposition and Prime Minister George Papandreou would stand down to make way for a new leader.

However, further details have yet to be thrashed out as there is currently no agreement between Papandreou's PASOK party and the conservative opposition led by Antonis Samaras as to who the next Greek leader might be. Papandreou and Samaras are due to meet on Monday to decide who will take over as Prime Minister when under fire Papandreou stands down.

The euro rose against the dollar following news of a deal between Papandreou and Samaras, but the common currency later fell below $1.38 as it became clear that the agreement was sketchy at best.

The FT reported late on Sunday that three major Greek banks (Alpha Bank, EFG Eurobank Ergasias and Piraeus Bank) have issued $8.8 billion worth of government-backed bonds that could be used as collateral to obtain funding from central banks.

Italy and its Prime Minister Silvio Berlusconi are also coming under increasing pressure over the country's finances, with a vote in the Italian parliament on Tuesday threatening to bring down Berlusconi's government. The Italian leader faces a rebellion by politicians within in his party, unhappy over the failure to adopt a number of key austerity measures to tackle the nation's debt.

ECB Governing Council Member Yves Mersch said in an interview with Italian newspaper La Stampa that the central bank could stop purchasing Italian bonds if Italy fails to take appropriate action over its debt.

The chairman of Goldman Sachs Asset Management, Jim O'Neill told the British Sunday Telegraph that the European Central Bank must show more leadership to calm "worried investors" and he claimed that a number of euro zone countries could leave the common currency if German-backed fiscal integration is adopted.

An FT report late on Sunday claimed the G20 may meet again before the end of the year. Citing "G20 sources", the newpaper said a further meeting would aim to build a "firewall" around Greece to prevent contagion.

A Eurogroup meeting of euro zone finance ministers will take place in Brussels on Monday from 14:00 London time. A euro zone official told Reuters that finance chiefs will speed up plans to strengthen the European Financial Stability Facility (EFSF)bailout fund by the end of the month, rather than the end of the year as originally planned.

Corporate releases to watch on Monday include L'Oreal third quarter sales figures and outdoor advertiser JC Decaux reporting from France, while Ryanair will announce its second quarter results with CEO Michael O'Leary due to appear on CNBC's Squawk Box Europe at 6:30 UK time.

EU monthly retail trade data will be available from 10:00, while German industrial production figures for September are out at 11:00 London time.