Greek PM faces critical confidence vote

Lawmakers are expected to give their verdict on Papandreou\'s new-look government at around midnight.

A victory would almost certainly presage backing for a vital package of austerity cuts which should be voted at the end of the month.

Defeat however would not only make his position untenable but also force Europe back to the drawing board.

Finance ministers from the 16 other countries which use the euro single currency on Monday gave Athens two weeks to pass austerity measures in return for a financial lifeline to stave off imminent insolvency.

"We are determined as a country, as a government to be on track with the programme, to move forward to do what is necessary in order to get our country into a fiscally much better and viable position," Papandreou said after talks in Brussels Monday with Herman Van Rompuy, president of the EU Council.

Although Papandreou has only a single figure majority in parliament after recent defections, analysts expect him to scrape through.

"The most likely scenario is that the government will win the confidence vote and then get approval for its austerity plan" before the end of the month, Platon Monokroussos, an analyst at Eurobank told AFP.

Thomas Gerakas, of the Marc polling institute, said that a successful vote would enable Papandreou to send a message to the eurozone and Greece\'s creditors that he will win approval for his austerity cuts.

"It is hard to imagine that any lawmaker could give his backing in the vote of confidence and then vote against the new economic programme," said Gerakas.

Amid mounting public anger over the prospect of more cuts, including a rolling programme of strikes and power cuts, Papandreou announced an overhaul of his government last Friday, sacking his finance minister.

The new incumbent, Evangelos Venizelos, left his first face-to-face with his eurozone partners on Monday without the 12-billion-euro instalment of a first rescue loan most had expected him to secure.

Instead he was told that his government had to win backing for its 28.4 billion euros of austerity cuts ($40.65 billion) when parliament votes on it on June 28.

Europe has been split over how to help prevent contagion from Greece hitting other countries in the eurozone, with German Chancellor Angela Merkel failing to persuade her peers that under a new second package of loan proposals, private creditors should swap existing Greek debt for new bonds with longer maturities.

The European Central Bank has argued that such as move would amount to a default, something which could send shock waves through the European and global financial systems. The ECB has warned that it might then halt lifeline funding for Greek banks.

Greece currently has debts of around 350 billion euros and is desperate to secure a second bailout worth more than 100 billion euros after a 110 billion euro loan deal last year failed to stop the rot.

Time is running out for Athens as it faces an imminent cash crunch that could see it default on its debt payments by mid-July.

After holding late-night talks with Papandreou, European Commission president Jose Manuel Barroso said the Greek parliament faced a "crucial" vote on June 28, stressing that approval of the austerity package was a condition for the eurozone to release the next tranche of aid to Athens.

"I therefore trust that Greece\'s elected representatives will back these measures next week in a spirit of national and indeed European responsibility," Barroso said.

The International Monetary Fund, which is funding a third of Greece\'s first 110 billion euro bailout, warned decisive action is needed to prevent the crisis from spreading throughout the eurozone and beyond.

"Failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers," an IMF report said.

Wrapping up two days of difficult negotiations on the debt crisis in Luxembourg on Monday, the host Jean-Claude Juncker said Greece had no option but to deliver on demands made by its international backers.

"The Greek parliament has to know this has to be done," underlined Juncker, who is Luxembourg\'s premier and heads the group of eurozone finance ministers.

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