Greek Prime Minister Lucas Papademos's crisis coalition cleared its first hurdle on Wednesday night 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 of 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 could not be higher. If Greece defaults, he or his successor risk presiding over the exit from the euro.
"Dealing with Greece's problems will be more difficult if Greece is not a member of the euro zone," Papademos, a former ECB vice president, told parliament.
"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.
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.
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 February 19 and Samaras made clear on Wednesday he saw the Papademos administration as a necessary but temporary stopgap.
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.
PROTESTS
On Thursday, tens of thousands of protesters are expected to join an annual rally to mark the Nov. 17 student uprising in 1973 that helped to 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 crisis on corrupt politicians and rich tax evaders.
Underlining the challenges facing Papademos, the GENOP-DEH union of state-owned utility PPC shut off power to the Health Ministry for four hours on Wednesday in a symbolic protest against a 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 — a claim denied by the ministry and by the utility.
