Greek govt set to win confidence vote, cracks emerge

ATHENS Tue Nov 15, 2011 6:38pm EST

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ATHENS Nov 16 (Reuters) - Greece's new government should comfortably survive a vote of confidence on Wednesday but Prime Minister Lucas Papademos faces a daunting task repairing the shattered public finances, and cracks are already appearing in his crisis coalition.

Polls show Papademos, a former vice president of the European Central Bank, has the backing of three in four Greeks but the need to implement painful tax rises and spending cuts to secure fresh loans and stave off bankruptcy will sorely test that support.

At stake are an 8 billion euro loan tranche Greece needs to meet debt repayments due next month and a new bailout worth 130 billion euros. Greece needs some 80 billion euros of that second rescue package in early 2012.

Papademos's national unity government brings together bitter rivals, the conservative New Democracy of Antonis Samaras, the Socialists of fallen prime minister George Papandreou and the far-right LAOS party.

"The government is asking for a vote of confidence. This should not be taken for granted because of its big majority. It is a symbolic, political action," Finance Minister Evangelos Venizelos said in Tuesday's confidence debate.

"We will help ourselves and the euro zone if we do what we have to do now, quickly, responsibly, so that Greece can always be a member of the euro zone and for the euro zone to exist, to permanently overcome the risk of a default," he said.

The vote is scheduled for 1300 GMT but may be delayed.

On the eve of the confidence motion, New Democracy lawmakers defied the European Commission's request for a written pledge from the three parties on meeting the terms of Greece's bailout, saying they would not bow to Brussels.

New Democracy MP Nikos Dendias said orders "from Brussels cannot be a legitimate policy".

Such a stance will test anew 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.

Further highlighting the lack of unity in a government that must prepare for an election in the first quarter of 2012, 101 Socialist deputies signed a petition on Tuesday opposing their party's cooperation with New Democracy and LAOS.

PAINFUL AUSTERITY

Athens will begin thrashing out a deal with private bondholders on Thursday to slash 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 330 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.

Tens of thousands of protesters are expected to join an annual rally on Thursday to mark the Nov. 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 nearly two-year-old economic crisis on a corrupt and quarrelsome political elite and rich tax evaders.

"We expect massive participation as rage and anger have been dwelling in people for so long ... It is very possible that some groups will misbehave," said Mary Bossis, international security professor at the University of Piraeus.

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