Greek Prime Minister George Papandreou plans to form a new cabinet on Thursday and seek a vote of confidence from his fractious Socialist party to try to push through an austerity package and avoid default.
Papandreou must pass the new 5-year campaign of tax rises, spending cuts and sell-offs of state property to receive a new EU/IMF bailout and a 12 billion euro aid tranche that Athens needs to pay back debt that matures in August.
Papandreou may seek to replace his finance minister, George Papaconstantinou, the main architect of hugely unpopular budget cuts demanded by the EU and the IMF as part of Greece's 110 billion euro bailout last year.
The International Monetary Fund is very concerned by the latest political turmoil in Greece but stands ready to help if the government can win consent for its austerity plan, a senior official said on Thursday.
"I am concerned the situation has changed very dramatically in the past 24 hours," Zhu Min, a special advisor to the IMF's managing director said.
"We have a team in Athens ready to conclude a review and move things forwards but now, given the situation, there is a lot of uncertainty so we are very cautiously, very closely monitoring the process.
"We hope the Greek government will have consent in bringing its proposals and we will be able to conclude our review," he said.
The reshuffle underscores the tenuous political and popular support for the new deal, but analysts say Greece has no choice but to carry on with the austerity measures or face default.
"If Papandreou gets the vote of confidence we will not go to elections and the chances that the mid-term plan passes will increase," Theodore Couloumbis of the ELIAMEP think tank said.
Nonetheless, world stocks and the euro slumped late on Wednesday as the upheaval fed fears of a default.
They fell further in Asia on Thursday after a Dutch newspaper quoted ECB policymaker Nout Wellink calling for a doubling of the European bailout fund.
He said the fund should be increased to 1.5 trillion euros ($2.15 trillion) if politicians want private-sector investors to participate in a second bailout of Greece.
Papandreou had initially offered to step down and form a unity government with opposition parties, but he abandoned the idea after the conservative New Democracy demanded Athens renegotiate its year-old international bailout.
New Democracy leader Antonis Samaras said the only way out of the crisis was early elections, but analysts said that would only happen in the unlikely event that the government failed to get a vote of confidence.
Political observers also said the reshuffle could persuade rebellious backbenchers in his PASOK party to back the measures despite widespread public anger.
"It's rare that deputies of a ruling party vote in favor of getting out of parliament," Couloumbis said.
Former ECB Vice-President Lucas Papademos is most frequently cited as a candidate to replace Papaconstantinou, who local media have said may be on his way to the Foreign Ministry.
But ALCO's Panagopoulos added that the prime minister may have a hard time convincing people outside the political arena to join his embattled government, which faced mass protests on Wednesday over the prospect of yet another squeeze.
The new austerity package foresees 6.5 billion euros ($9.4 billion) in tax rises and spending cuts this year, doubling the effect of measures agreed with bailout lenders that have jacked unemployment up to a record 16.2 percent and extended a deep recession into its third year.
The plan includes new luxury taxes, a crackdown on tax evasion and tax rises on soft drinks, swimming pools, restaurant bills and real estate.
The euro zone member's 750,000-strong public work force would be cut by a fifth.
It also aims to raise 50 billion euros by selling off state-owned firms.
Thousands of activists and unionists converged on Athens's central Syntagma square on the parliament's front steps on Wednesday to try to stop lawmakers from debating the measures in committee that they hope to pass by the end of the month.
Stun grenades boomed around the square and plumes of smoke rose from burning garbage bins as police fired teargas and fought running skirmishes with scores of youths who fought back with rocks and long clubs.
"We want them out. Obviously these measures are not going to get us out of the crisis," Antony Vatselas, a 28-year-old mechanical engineer, crying from teargas. "They want only us to pay for it. And they are doing nothing. I want the debt to be erased. If this doesn't happen, there is no exit for Greece."
One group hurled petrol bombs and clashed with police at buildings housing the Finance Ministry, also on the square.
Reuters witnesses saw flames in front of an entrance to the main building and a similar clash a few buildings down.
The vast majority of the crowd -- which included union workers, political party members, pensioners, and a wide array of Greeks upset at the new austerity measures - only shouted at the parliament building and remained peaceful.
"Thieves, traitors!" many chanted. "Where did the money go?" About 1,500 police closed a large part of the city centre and created a corridor to hold back protesters as lawmakers drove up to the building in official limousines.
The Health Ministry said 33 people were injured. Fifteen people were arrested, police said.
Police officials said the crowd reached around 30,000 but they often underestimate numbers.
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