Greece's PM George Papandreou 'to fight on'

Mr Papandreou said he was determined to help deliver Greece from its financial crisis

Greek Prime Minister George Papandreou has vowed to fight on in seeking support for new austerity measures that have sparked strikes and protests.

Greek ruling party deputies are holding an emergency meeting to discuss the crisis that has shaken global markets.

To a standing ovation, Mr Papandreou said he would reshuffle his cabinet before putting it to a vote of confidence by the parliament.

He was speaking after some figures in his party appeared to move against him.

"I seek and will continue seeking wider consensus," said Mr Papandreou. "Our response to the challenges we face is stability and to stay on our course of reforms."

The proposed measures are necessary to gain EU and IMF aid, but have been met with fierce opposition inside Greece.

Greece witnessed some of the most violent protests in more than a year on Wednesday, as tens of thousands of activists and unionists gathered in Syntagma square in Athens, near parliament, while a further 20,000 demonstrated in Thessaloniki.

Meanwhile unions held a nationwide general strike - Greece's third this year.

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 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 as Athens cannot guarantee it will remain solvent for next 12 months
  • 29 June 2011: Deadline for Greece to agree new austerity package
More time?

Mr Papandreou faces the threat of a revolt in his socialist Pasok party over the controversial package, with two deputies resigning on Thursday in protest against the proposed austerity measures.

The resignations do not affect the party's five-seat parliamentary majority as the seats are automatically allocated to the next Socialists in line, but they are an indication of the difficulties Mr Papandreou faces in winning confidence in his leadership, says the BBC's Malcolm Brabant in Athens.

President Karolos Papoulias has urged Greek politicians not to make matters worse by turning the economic crisis into a political one.

Mr Papandreou, who came to power in 2009, has not indicated the extent of his ministerial shuffle, but correspondents say it may include the replacement of Finance Minister George Papaconstantinou.

Protesters run away from tear gas canister and a burning barricade during clashes with riot police in Athens' central Syntagma (Constitution) Square, 15 June 2011 Anti-austerity riots rocked Athens on Wednesday

Economic analysts predict the post is likely to be filled by Lucas Papademos, a former vice-president of the European Central Bank.

This would be met with approval from the IMF and EU, but whether it will satisfy members of parliament remains unclear, our correspondent says.

A confidence vote in the new cabinet is expected on Sunday, reports say.

This would give the EU more time to finalise a package to help Greece.

IMF support

Assuming that some form of Greek government emerges out of the political discussions now under way in Athens, it is now almost certain that Greece will get the official money it needs to stay above water for a few more weeks, notably the next tranche of last year's EU-IMF bailout, says the BBC's economics editor, Stephanie Flanders.

Start Quote

EU leaders are at loggerheads over the issue: should Greece be allowed to do a controlled, partial default on its debts which forces banks and pension funds to lose some of the money they lent to Greece?”

End Quote Paul Mason Economics editor, BBC Newsnight

All the eurozone ministers have to do is agree in principle to fill the funding gap in the Greek economic programme, which they will now do on Sunday, adds our correspondent.

The government is seeking approval for a package of 28bn euros (£24.6bn; $40.5bn) of cuts, due to take effect from 2012 to 2015.

The policies are required for the release of the next tranche of aid - 12bn euros - from the EU and IMF.

During talks this week, Mr Papandreou reportedly offered to step down to clinch a coalition, but later agreed to carry on.

Greece's debt was downgraded by Standard & Poor's ratings agency earlier this week, making it the lowest-rated of the countries it monitors.

Wednesday's unrest destabilised markets, with major indexes witnessing the biggest drop on Wednesday since 1 June, and the euro sliding more than 1% against the dollar.

Yields on Greece's 10-year bonds reached a record high of 18.4%.

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