Privatisation of Greece's national carrier, Olympic Airways, is in trouble again after reports that the preferred bidder has pulled out of talks.

An unidentified transport ministry source has reportedly confirmed that the Golden Aviation group and the government have broken off talks.

The Reuters and AFP news agencies have both quoted ministry sources, who indicated there would be an announcement later on Tuesday.

The Golden Aviation consortium - led by Greek shipping magnate Stamatis Restis - was only named as the government's preferred choice in December.

It offered 150m euros (�98.4m; $161.7m) for a 70% stake in Olympic.

Late on Monday there was more bad news for the government's privatisation plans.

The sale of its 23% in Hellenic Petrol, which it was to sell to a consortium led by Russia's Lukoil, was cancelled because the bid was considered unacceptable

Difficult talks

In December the government said it would begin talks with Olympic's domestic rival Aegean Airlines if the Golden Aviation bid came to nothing.

It is unclear if Aegean is still interested.

The talks with Golden Aviation have been rumoured to be in difficulties for some time.

The government's initial attempt to sell Olympic failed in 2001 when the then preferred bidder Axon Airlines filed for bankruptcy, blaming the 11 September attacks on the US.

The sale was dealt another serious setback in December when the European Commission ruled the airline must repay 194m euros to the Greek Government, which it said was an illegal state subsidy.

The government said it would appeal against the decision - which it must do by mid-February - and tried to assure investors that they would not be affected.