Greek government faces daunting task

Greek Prime Minister Lucas Papademos's crisis coalition cleared its first hurdle on Wednesday by winning a vote of confidence, but faces a Herculean task keeping fractious parties behind painful reforms needed to avert national bankruptcy.

The 300-member parliament endorsed by 255 votes a national unity government that unites bitter rivals from the Socialist party of fallen premier George Papandreou, the conservative New Democracy and the far-right LAOS party.

But, in a sign of tensions ahead, New Democracy leader Antonis Samaras again refused to provide the written guarantee sought by Brussels to meet the terms of Greece's latest bailout worth 130 billion euros -- a stance sure to rile creditors.

The stakes for the government of Papademos, who as Bank of Greece chief presided over his country's entry into the euro zone in 2002, could not be higher. If Greece defaults, he or his successor risk presiding over its exit.

"Dealing with Greece's problems will be more difficult if Greece is not a member of the euro zone," Papademos, a former vice president of the European Central Bank, told parliament in a final appeal for support ahead of the vote.

"I'm certain that we will make it if we are united."

The first task of his government is to approve a new budget of tax hikes and spending cuts that will unblock the next tranche of financial aid from the EU and IMF worth 8 billion euros to repay debts due next month.

"We must take more radical measures to deal with the crisis which include ... boosting the resources and the flexibility of the EFSF (the EU's bailout fund) and creating a stronger framework of economic governance in the euro zone," Papademos said.

Greece's two-year debt saga has morphed into a major crisis threatening the very existence of the euro. Global equity markets and the euro slid again on Wednesday after the European Central Bank failed to stem a bond sell-off in the euro zone by buying up member states' sovereign debt.

AUTHORITY

European leaders, weary with Greece's failure to deliver on fiscal targets, have started to speculate openly whether the country of 11 million people has a future in the euro zone.

Papademos, a quietly-spoken academic economist with no political experience, must assert his authority over a cabinet packed with stalwarts from the two main parties that have ruled Greece in turns for decades as it built up the huge debt load -- totalling 350 billion euros -- that it now cannot repay.

He hopes national pride will trump narrow party interests.

"We need to rescue our country, we need to rectify our country, we need to restore our country's integrity," Finance Minister Evangelos Venizelos, a Socialist, told parliament.

The problems facing Greece were underscored by data released on Wednesday that showed its austerity-fuelled recession had driven the budget deficit wider in October, the government failing to boost revenues despite a batch of unpopular new taxes.

Divisions threaten to open within the unity cabinet.

Samaras repeated his demand for pro-growth policies to revive an economy shattered by four years of recession and reaffirmed his refusal to sign the pledge demanded by the European Commission, which fears Greek backsliding on reforms.

"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.

The bailout deal commits the government to fight rampant tax evasion, sell off state companies and cut a famously bloated public sector.

Both the Socialist PASOK and New Democracy have a tentative agreement to hold an early election on Feb. 19 and Samaras made clear on Wednesday he saw the Papademos administration as a necessary but temporary stopgap.

"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 by the end of the (first) quarter do not help the new prime minister," he said.

However, George Karatzaferis, leader of the coalition's far right LAOS party, disagreed, telling Reuters in an interview he saw no need for an early election if the government proved successful.

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