Greek Government Set to Win Confidence Vote, Cracks Emerge

Riot police in Greece attack workers and youth who are protesting the collapse of the country. The world capitalist economic system has manifested itself in numerous European countries including Portugal., a photo by Pan-African News Wire File Photos on Flickr.

Greek government set to win confidence vote, cracks emerge

9:13am EST
By Gareth Jones and Harry Papachristou

ATHENS (Reuters) - A national unity government aiming to save Greece from bankruptcy was set to win a parliamentary vote of confidence on Wednesday but the leader of the conservative faction gave only qualified support.

Prime Minister Lucas Papademos has the backing of three in four Greeks, but the need to implement painful tax rises and spending cuts to secure fresh loans will sorely test support for the technocrat's quarrelsome three-party coalition.

Highlighting the challenges facing Papademos, the main utility union briefly cut off power to the Health Ministry building on Wednesday to protest against a property tax the government is trying to collect through electricity bills.

The leader of the New Democracy conservatives, Antonis Samaras, said he would back the coalition to unblock a sixth tranche of EU and IMF aid worth 8 billion euros needed to meet next month's debt repayments.

But he also repeated his demand for pro-growth policies to revive an economy shattered by four years of recession and reaffirmed his refusal to sign a written pledge demanded by the European Commission to meet the terms of Greece's bailout.

"If there is something that we all agree on, of course we will vote for it. But we are making clear we won't approve anything we disagree with," Samaras told parliament.

"Those who try to prolong the mandate and role (of this government) ... undermine this government, they do not help it. Those who try to avoid elections at the end of the quarter do not help the new prime minister," he added.

The confidence vote in Greece's new government -- which unites Samaras' New Democracy, the Socialists of fallen prime minister George Papandreou and the far-right LAOS party -- is set for 1600 GMT.

As well as the sixth tranche, Papademos -- a former vice president of the ECB with no political experience -- must lock down a new bailout worth 130 billion euros ($175 billion). Greece needs some 80 billion euros of that sum in early 2012.

The plan includes fighting tax evasion, selling off state companies and cutting a famously bloated public sector.

Samaras's refusal to commit in writing to implementing the terms of the new bailout will further test the patience and confidence of Greece's European partners, who have already begun to speculate publicly on whether the country of 11 million people has a future within the euro zone.

"Is there a bigger commitment than giving a vote of confidence to the government that has been formed for this reason (of implementing the bailout)?" Samaras told parliament.

As Greece's politicians debated, the European Central Bank stepped in to stem an accelerating sell-off of euro zone government bonds and the United States called for more decisive action to halt Europe's debt crisis.

In Italy, another technocrat leader catapulted into power by the crisis, Mario Monti, was set to name a national unity cabinet to implement long delayed structural economic reforms.

But the appointments of Monti and Papademos have done little to convince investors that European countries can get their finances in order.

European shares and the bonds of weaker euro zone countries recovered somewhat after the ECB intervention but markets remain jittery. The ECB is resisting international calls to act as Europe's lender of last resort, saying it is for governments to resolve the crisis through austerity measures and reforms.

In Athens, the GENOP-DEH union of state-owned utility PPC shut off power to the Health Ministry for four hours in a symbolic protest against the deeply unpopular new property tax.

The union has repeatedly refused to cut the power of low income earners who cannot pay. The tax usually amounts to hundreds of euros for an ordinary home and the union said the ministry itself owed 3.8 million euros in unpaid power bills.

"We will not allow it. We will stop, in any way we can, the cutting of power in the houses of the poor, the unemployed, the pensioner, the low-wage earner," GENOP-DEH President Nikos Fotopoulos told NET TV.

"Electricity cannot be used as a lever for blackmail."

On Thursday, tens of thousands of protesters are expected to join an annual rally on Thursday to mark the November 17 student uprising in 1973 that helped topple the 1967-74 military junta.

The ranks of students and workers are likely to be swelled by middle-class Greeks who have diligently paid their taxes and blame the four-year economic crisis on a corrupt political elite and rich tax evaders.

SLASHING DEBT

Athens will also begin thrashing out a deal with private bondholders on Thursday to cut its public debt, sources said, tackling a key pillar of the 130-billion-euro bailout plan agreed with euro zone leaders last month.

The plan envisages slashing Greece's 360-billion-euro debt load by a third and imposing a 50 percent loss on private bondholders, but it has been poorly received among Greeks who fear further waves of painful austerity.

Papademos, an academic economist, was due to meet the private sector's lead negotiator on the deal, Charles Dallara, managing director of the Institute of International Finance (IIF), on Wednesday evening, the premier's office said.

The Financial Times cited a proposal from bank negotiators for Greek bondholders that said they would swap their debt only if new bonds feature high interest rates and had extra incentives, including annual payments if Greece's economy recovered more than expected.

It said the IIF had proposed three different options that all indicated a reduction of 51-53 percent in the value of the debt but cited a source saying Greece was proposing losses of 70-80 percent. ($1 = 0.739 Euros)

(Writing by Gareth Jones)