15 June 2011 Last updated at 15:54 ET

Greek PM George Papandreou to form new government

George Papandreou: "This is a time of duty"

Greek PM George Papandreou is to form a new government as he tries to win support for austerity measures demanded by the EU and IMF.

He will seek to have the government ratified in a vote of confidence in parliament on Thursday, he said.

Mr Papandreou has faced the threat of a revolt in his socialist Pasok party over the controversial package.

Greek police clashed with anti-austerity protesters near parliament, and unions held a general strike.

"I will continue on the same course," said Mr Papandreou in a TV address on Wednesday evening. "This is the road of duty, together with Pasok's parliamentary group, its members, and the Greek people."

Protesters fought running battles with the police in central Athens

"Tomorrow I will form a new government, and then I will ask for a vote of confidence."

Mr Papandreou is seeking to push through a new austerity programme of 28bn euros (£24.6bn; $40.5bn) in cuts to take effect from 2012 to 2015.

In order to avoid default, the government is trying to pass the measures by the end of the month and secure the release of 12bn euros in aid from the EU and IMF.

'Crucial moment'

The conservative New Democracy party reportedly demanded that as a condition of agreeing to a unity government, Mr Papandreou should resign and the terms of the austerity package should be renegotiated.

But the prime minister said: "Before the meaningful issues were negotiated, conditions were made public that could not be accepted."

Such conditions, he added, "would have kept the country in a lingering state of instability and introversion, while the vital national issue remains dealing with the national debt".

Development Minister Mihalis Chrysohoidis said it was "wrong to think that a new government could go to Brussels tomorrow and renegotiate everything".

EU commissioners are said to have a "profound sense of foreboding" about Greece and the future of the eurozone, according to leaked account of a meeting on Wednesday seen by the BBC.

On Tuesday, one member of parliament defected from Pasok, leaving it with only 155 of the chamber's 300 seats.

At least one other Pasok deputy has threatened to vote against the new programme of cuts and privatisation of state assets, and a number of others are said to be wavering.

Mr Papandreou held talks on Wednesday with Greek President Karolos Papoulias, telling him that "a national effort" was required to push the austerity measures through.

Later, an unnamed official speaking to the Associated Press denied reports that Mr Papandreou had offered to resign in a conversation with opposition leader Antonis Samaras.

Greek bail-out timeline

• May 2010: EU and IMF agree bail-out package to prevent Greece defaulting on its debts; in return, Greece agrees to make 30bn euros of budget cuts over the next three years
• February 2011: EU and IMF experts tell Greece it must make further cuts to keep its recovery on track
• April 2011: EU figures reveal Greek deficit revised up to 10.5%, worse than previously thought
• May 2011: Greece begins privatisation programme but is warned the IMF may not release more funds because Athens cannot guarantee it will remain solvent for the next 12 months
• 29 June 2011: Deadline for Greece to agree new austerity package

Opposition politicians called openly for the prime minister's resignation.

"The most important member of a ship's crew is the captain, and the captain has to go," conservative deputy Theodoros Karaoglou said.

"If we joined forces, we could go to our [creditors] together to negotiate and the results of course would be better."

'Thieves, traitors'

Earlier, thousands of activists and unionists gathered in Syntagma square in Athens, near parliament.

Police estimated the size of the crowd at between 20,000 and 30,000, while local media reports put the number higher.

Correspondents said those who turned out represented a broad cross-section of society. "Thieves, traitors!" some shouted. "Where did the money go?"

Some protesters tried to prevent Greek deputies from entering the parliament building to hold a debate on the austerity measures.

Police responded with tear gas as some protesters lobbed rocks and yoghurt. Some demonstrators threw petrol bombs and slabs of paving during running battles in the surrounding streets. A number of people were injured and several arrested.

A further 20,000 people demonstrated in Thessaloniki, police said.

The general strike was the third in Greece this year.

Public offices, transport, ports, and banks were badly disrupted, while hospitals offered only emergency care.

The impact of the chaotic scenes in Greece could be seen in international financial markets, with yields on Greece's 10-year bonds reaching a record high of 18.4%.

Eurozone finance ministers failed on Tuesday to agree on how private creditors might contribute to a new Greek bail-out.