Greece: MPs begin voting on confidence motion

Athens and EU flag What went wrong in Greece?

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money.

What went wrong in Greece?

The opening ceremony at the Athens Olympics
Greece went on a big, debt-funded spending spree, including paying for high-profile projects such as the 2004 Athens Olympics, which went well over its budget.

What went wrong in Greece?

A defunct restaurant for sale in central Athens
The country was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.

What went wrong in Greece?

A man with a bag of coins walks past the headquarters of the Bank of Greece
Greece's economic problems meant lenders started charging higher interest rates to lend it money. Widespread tax evasion also hit the government's coffers.

What went wrong in Greece?

Workers in a rally led by the PAME union in Athens on 22 April 2010
There have been demonstrations against the government's austerity measures to deal with its debt, such as cuts to public sector pay and pensions, reduced benefits and increased taxes.

What went wrong in Greece?

Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
Eurozone leaders are worried that if Greece were to default, and even leave the euro, it would cause a major financial crisis that could spread to much bigger economies such as Italy and Spain.

What went wrong in Greece?

Greek Prime Minister George Papandreou at an EU summit in Brussels on 26 March 2010
In 2010, the EU, IMF and ECB agreed a bailout worth 110bn euros (£92bn; $145bn) for Greece. Prime Minister George Papandreou quit the following year while negotiating its follow-up.

What went wrong in Greece?

Lucas Papademos
Lucas Papademos, who succeeded Mr Papandreou, has negotiated a second bailout of 130bn euros, plus a debt writedown of 107bn euros. The price: increased austerity and eurozone monitoring.

What went wrong in Greece?

In May 2012 elections a majority of voters backed parties opposed to austerity, but no group won an overall majority resulting in political deadlock. Fresh elections have been called in June.
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Greece's parliament has begun voting on a motion of confidence in the government, part of the administration's battle to win support for new austerity measures.

The vote is a first step towards a vital 12bn euro ($17bn; £10bn) loan from the EU and the International Monetary Fund (IMF).

Greece needs the loan to pay its debts.

If the government survives, Greece's parliament will be asked to back the latest spending cuts - of 28bn euros.

This vote will be held on 28 June.

A result is expected after 0035 local time (2235 GMT).

All the indications are that Mr Papandreou will win his vote of confidence with a handful of seats to spare, says the BBC's Malcolm Brabant in Athens.

But one former rebel MP who now plans to vote in favour of the government said the public's tolerance had been used up.

Panagiotis Kouroumplis also warned that politicians were increasingly losing touch with ordinary people demonstrating against the government across the country.

Thousands of protesters have again gathered in Syntagma Square in Athens, in front of the Greek parliament.

One protester, Calliope Iris, told the BBC: "The Greek police treat us like criminals. I used to have my own company and had to close it down at the beginning of 2010. The economic climate is forbidding anything new.

"I will continue to go back to Syntagma Square to protest."

EU Commission President Jose Manuel Barroso has said Greece faces a "moment of truth" when it votes next week on austerity measures.

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Media captionBBC's Gavin Hewitt: "Thousands of protesters are heading for the Greek parliament"

The EU and IMF will only release funds once the austerity measures have been voted through.

"No-one can be helped against their will," Mr Barroso said in Brussels.

"Next week is the moment of truth, where Greece needs to demonstrate that it is genuinely committed to the ambitious package of further fiscal measures and privatisations put forward by Prime Minister [George] Papandreou's government."

Mass demonstrations

Tuesday's vote of confidence in the government follows the appointment of the new Greek cabinet, which Prime Minister Papandreou put in place last Friday.

Mr Papandreou hopes the new cabinet, and specifically the new Finance Minister, Evangelos Venizelos, will help secure parliament's backing for further austerity measures that are already proving deeply unpopular with the Greek people.

At the weekend, eurozone finance ministers decided to postpone their decision on whether to grant Greece the 12bn euro loan until the country introduced the additional spending cuts and privatisation programmes.

Greece needs this aid - the latest tranche of the EU and IMF's 110bn-euro aid package - by July to be able to keep up with payments to the creditors of its huge debts, which amount to 30,000 euros per person.

If the Greek parliament does back the austerity measures, eurozone finance ministers will meet again on 3 July, with the funds expected to be released by the middle of next month.

However, lawmakers are having to ponder their decision in the face of mass demonstrations, strikes, and even riots.

The latest protest against the cutbacks involves workers at Greece's state-owned electricity company, who are on a 48-hour walkout.

BBC Europe editor Gavin Hewitt, who is in Athens, says ministers have argued that without further austerity measures in exchange for a new bail-out, Greece is heading for bankruptcy. However, many Greeks appear to prefer that option to further austerity, he says.

Mr Venizelos said the decision of the eurozone finance ministers to delay the loan showed that urgent action was now needed. "We have plenty to do," he said.

If Greece were to default on its debt - worth 150% of its annual GDP output - it would have to leave the 17-member euro group of nations.

UK Conservative MEP Daniel Hannan said the bailout would not help the people of Greece: "This is not assistance for Greece, it's not how anyone there sees it. They understand perfectly well what the bail-out means, which is that the money will go to European bankers and bondholders, but the repayment will come from Greek taxpayers. So far from being helped, Greece is being sacrificed to save the euro."

IMF mission

On 20 June, EU finance ministers agreed in principle on a second bail-out package for Greece, about the same size as the first - 110bn euros - passed last May.

The new package, to be outlined by July, will include loans from other eurozone countries.

It is also expected to feature a voluntary contribution from private investors, who will be invited to buy up new Greek bonds as old ones mature.

Officials said this money had to be freely given, or it would be seen as technical default on Greece's debt repayments.

If Greece were to default - or seen to be in default - it would mean massive losses for European banks that hold Greek debt, including the European Central Bank.

Officials said the new plan was expected to fund Greece into late 2014 and total about 120bn euros.