* Reshuffled cabinet survives late-night vote
* Thousands demonstrate outside parliament
* Reforms must be implemented by end June
* Euro gains after vote
(Adds detail, Barroso, reaction)
By Harry Papachristou and Dina Kyriakidou
ATHENS, June 22 Greece's embattled government
survived a confidence vote on Wednesday that was crucial to
avoiding a sovereign default, as thousands of protesters chanted
insults outside parliament.
The assembly voted confidence in the government, reshuffled
by Prime Minister George Papandreou to stiffen resolve behind a
painful new austerity programme, by 155 votes to 143 with two
All Papandreou's Socialist Party deputies voted solidly with
"If we are afraid, if we throw away this opportunity, then
history will judge us very harshly," Papandreou said in a final
appeal for support before the vote.
Protesters besieged the parliament, chanting slogans against
the politicians, shining hundreds of green laser lights at the
building and into the eyes of riot police outside and pushing
their hands forward in a traditional insult. They held up a mock
gallows with several nooses.
The successful vote, closely watched outside Greece, had an
immediate impact with the euro making gains, although traders
said continuing concerns about implementation of the measures
contained the rise.
European Commission President Manuel Barroso expressed
immediate relief. "Tonight's vote in the Greek Parliament
removes an element of uncertainty from an already very difficult
situation," he said, adding that Papandreou could now
concentrate on implementing the reforms.
"Although this clearly is not going to be a long-term fix,
investors see this as a chance that the can will be kicked
further down the road and so I think we are going to see
tomorrow a world-wide push to risk assets," said David Dietze,
Chief Investment strategist at Point View Financial Services.
Papandreou's government must rapidly pass two more tests --
enacting the austerity plan and the laws needed to implement it
-- to win a new bailout to avert the euro zone's first sovereign
default and possible global economic disaster.
The vote follows a European ultimatum requiring the
debt-choked Mediterranean state implement a new five-year
package of deeply unpopular reforms in two weeks or miss out on
a 12-billion euro aid tranche and plunge into bankruptcy.
Barroso had piled on pressure before the vote, saying that
Greece faced a "moment of truth" and needed to show it was
genuinely committed to the reforms.
"No-one can be helped against their will," he said.
Acting IMF chief John Lipsky sent a similar message, saying
international lenders were willing to help peripheral euro zone
economies as long as they tried to carry out reforms.
He said the Greek fiscal system was broken but could be
fixed with the right political will.
As parliament debated the confidence motion, demonstrators
stepped up their protests in the square, where hundreds have
camped for weeks to show their opposition to more austerity,
which has deepened the worst recession for 37 years.
"I believe we should go bankrupt and get it over with. These
measures are slowly killing us," said 22-year-old student Efi
Koloverou. "We want competent people to take over."
Glykeria Madaraki, a 39-year-old unemployed woman, said:
"God help us. There is no way these people are getting us out of
the crisis. I feel insecure and I see my country being sold off.
They didn't ask what we think about all this. I want elections."
Inside parliament the opposition poured similar disdain on
the government. "This is not a programme to salvage the economy,
it's a programme for pillage before bankruptcy," said Alexis
Tsipras, head of the small opposition Left Coalition.
Finance Minister Evangelos Venizelos, in an attempt to
answer a key grievance of protesters, told parliament the
government's top priority would be to build a fairer tax system.
Papandreou stifled dissent within the party last week by
replacing unpopular government figures with critics of the plan.
The government must hammer through the five-year package of 28
billion euro ($39.84 billion) in tax hikes and spending cuts by
It must then push through laws implementing the reforms --
potentially more difficult as it will tackle individual
privatisations, tax measures and spending cuts -- in time for an
extraordinary meeting of euro zone finance ministers on July 3.
The cabinet will meet on Wednesday afternoon to approve a
draft bill implementing the measures, officials said.
The government had been widely expected to survive the
confidence vote. Defeat would have led to political chaos and
early elections which PASOK would likely lose.
Greek bank shares gained more than 6.0 percent and 10-year
Greek bonds rose in a sign of optimism on Tuesday. The euro and
European shares also rose.
Having already missed targets agreed in its first, year-old
bailout, Athens needs the reforms if it wants to receive the
next tranche of those funds and secure a second bailout worth an
estimated 120 billion euros.
The new mid-term plan envisions raising 50 billion euros by
selling off state firms and includes 6.5 billion in 2011 fiscal
consolidation, almost doubling existing measures that have
helped extend a deep recession into its third year.
Most analysts remain sceptical that Greece will be able to
reduce its vast sovereign debt pile of 340 billion euros, or
more than 30,000 euros per head of its 11.3 million population,
even if it passes the reforms.
Inspectors from the International Monetary Fund and European
Union arrived on Tuesday to examine a request by newly appointed
Finance Minister Venizelos for changes to the mid-term plan.
Greece's government has said the lenders' inspectors would
discuss changes "at a technical level".
Euro zone officials have told Reuters the plan for the new
bailout, meant to extend Greece's year-old 110-billion-euro deal
and fund it into late 2014, would feature up to 60 billion euros
of fresh official loans, 30 billion euros from the private
sector and 30 billion euros from privatisations.
(Additional reporting by Renee Maltezou, Lefteris Papadimas in
Athens and John O'Donnell in Brussels; writing by Barry Moody;
editing by Alistair Lyon)