1 of 10. Riot policemen walk in front of the parliament during an anti-austerity rally in Athens February 11, 2012.
Credit: Reuters/Yiorgos KarahalisBy Harry Papachristou and Lefteris Papadimas
ATHENS (Reuters) - The Greek government told rebellious lawmakers on Saturday to back a deeply unpopular EU/IMF rescue in parliament or send the nation down "an unknown, dangerous path" to default and international economic isolation.
Conservative leader Antonis Samaras, who has attacked austerity policies for driving Greece ever deeper into recession, still told his party to back the 130 billion euro deal or be dropped as candidates in the next general election.
With voters deeply hostile to the bailout's tough conditions, former socialist Prime Minister George Papandreou admitted that backing austerity had cost him the premiership and even some of his friends, but the alternative was a collapse in living standards and further "unforeseeable consequences."
The coalition of Prime Minister Lucas Papademos has a huge majority, which should ensure parliament approves on Sunday a package including a further 3.3 billion euros in budget cuts this year, needed to secure Greece's second bailout since 2010.
But six members of his cabinet have already resigned over the heavy pay, pension and job cuts which the European Union and International Monetary Fund are demanding as the price of the funds, which Greece needs by next month to avoid bankruptcy.
INCALCULABLE CONSEQUENCES
Officials hammered home the message that Greece's future in the euro was at stake.
"The consequences of disorderly default would be incalculable for the country - not just for the economy ... it will lead us onto an unknown, dangerous path," Deputy Finance Minister Filippos Sachinidis said.
In an interview with the newspaper Imerisia, he described the catastrophe he believes Greece would suffer if it failed to meet debt repayments of 14.5 billion euros due on March 20.
"Let's just ask ourselves what it would mean for the country to lose its banking system, to be cut off from imports of raw materials, pharmaceuticals, fuel, basic foodstuffs and technology," he said.
Late on Friday the cabinet approved the draft bailout bill and a plan to ease the state's huge debt burden which has deepened the nation's political and social crisis and brought thousands out on the streets in protest.
As a 48-hour protest strike went into its second day, about 50 Communist party activists draped two huge banners on the ramparts of the Acropolis on Saturday, reading: "Down with the dictatorship of the monopolies (and the) European Union."
About 7,000 demonstrators gathered in central Athens, police said, but there was no repeat of trouble on Friday when police fired teargas at protesters throwing petrol bombs and stones.
SAMARAS CRACKS THE WHIP
Members of the conservative New Democracy party, which has a big lead in opinion polls before elections expected as early as April, are likely to back the deal solidly.
Samaras still warned his party, the second biggest in parliament, against stepping out of line. "This is obviously an issue of party discipline," he told New Democracy lawmakers in parliament, warning anyone who opposed the bailout "will not be a candidate in the next election."
However, the smallest party in the coalition, the far-right LAOS, quit the government in protest at the package on Friday, ordering its four cabinet members to resign. Two members of the Socialist PASOK party have also left the cabinet.
Papandreou, who negotiated the first bailout before his government collapsed in November, acknowledged the huge pressure on any politician backing the second rescue.
"I've lost friends, my family suffered, I gave up my office, I was insulted, vilified, like no other politician ever was in this country," he told PASOK's parliamentary group.
"Still, all that is nothing compared with what our people will suffer if we fail to do the right thing... Despite all the anger we are feeling inside, we must persevere."
Party discipline is much weaker at PASOK, whose support has dived to eight percent in the latest opinion from the nearly 44 percent it commanded when Papandreou led it into power in 2009.
A WHIFF OF REBELLION
Despite the whiff of rebellion, analysts expect parliament to pass the package, which also includes a bond swap which will ease Greece's debt burden by cutting the value of private investors' bond holdings by 70 percent.
Some economists suggest that if Greece defaulted and left the euro zone, its new national currency would dive in value and allow the Greek economy to become internationally competitive.
But government spokesman Pantelis Kapsis dismissed this notion. "We'll have to reduce the deficit, regardless of whether we have the euro or not."
Euro zone finance ministers have told Greece that it must explain how 325 million euros ($430 million) out of this year's total budget cuts will be achieved before it agrees to bailout.
Bailout documents released on Friday left blank the amount of the rescue but even 130 billion euros may not be enough.
Finance Minister Evangelos Venizelos said on Saturday 15 billion euros more might be needed to rescue the country's banks, confirming estimates from EU officials.
The banks are up to their necks in Greek government debt, the value of which will be slashed under the bailout, and have suffered huge losses of deposits as Greeks have either shipped their savings abroad or stuffed them under the mattress.
EU EXASPERATION
The European Union and the IMF have been exasperated by a series of broken promises and weeks of disagreement over the bailout. They will not release the aid without clear commitments by the main party leaders that the reforms will be implemented, regardless of who wins the next elections.
The uncertainty has upset world financial markets, with stocks snapping a five-day winning streak on Friday and the euro tumbling.
The bill, approved by the cabinet along with hundreds of pages of accompanying documents, sets out reforms including a 22 percent cut in the minimum wage, pension cuts worth 300 million euros this year, as well as health and defense spending cuts.
"The government believes that sustained implementation of this policy program, complemented by debt restructuring, will put the public debt on a clear downward path," it says in a draft letter to EU and IMF chiefs, attached to the bill.
In the same letter, the government promises to speed up implementation of reforms in the labor, product and services markets, cut spending, and push through a privatization plan.
One of the attached documents, which spells out the reforms Greece will have to undertake in return for the aid, says the target of cutting the debt to "about" 120 percent of GDP by 2020 from about 160 percent now will be achieved.
(Writing by David Stamp)
