Prime Minister George Papandreou, besieged by public protests and dissent in his own party, appealed to Greeks on Sunday to support deeply unpopular austerity reforms and avoid a catastrophic bankruptcy.
He addressed parliament at the start of a confidence debate on his new crisis cabinet before a meeting in Luxembourg, where euro zone finance ministers debated releasing a new injection of aid funds to keep Greece solvent.
Indicating the battle Papandreou faces in pushing through the reforms, more than 10,000 demonstrators protested later in front of parliament chanting: "We won't pay! We won't pay," and thrusting their open hands forward in a traditional insult.
"We knew that we were living off borrowed money, but we never knew how much...Why did they cut wages and pensions from us first and not from their own salaries?" said one protester, 50-year-old housewife Litsa Solanaki.
Papandreou, his own political survival on the line, said Greece was at a crossroads and its cash reserves would soon be exhausted without the 12 billion-euro loan tranche from the European Union and IMF.
"The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility," he told parliament. He overhauled his cabinet on Friday to stanch dissent in the ruling party after the departure of three deputies and weeks of protests threatened a five-year package of tax hikes, privatizations and spending cuts agreed with international lenders.
New Finance Minister Evangelos Venizelos told reporters in Luxembourg before the euro zone meeting that the reshuffled cabinet was committed to the aid programme, despite suggestions from some analysts that it would try to dilute implementation.
"It is a great opportunity for me to repeat the strong commitment of the Greek government and the strong will of the Greek people for the implementation of the programme," he said.
The EU and International Monetary Fund have demanded the plan in exchange for a fresh bailout worth some 120 billion euros ($172 billion) that Greece, effectively shut out of debt markets, will need in order to pay its bills up to 2014.
Venizelos has suggested he will ask his euro zone counterparts to approve some changes to the package aimed at "social justice". He gave no details, but his predecessor pledged earlier in the week to refrain from hiking heating oil tax and to raise the tax-free threshold on property.
Main opposition leader Antonis Samaras called in parliament for Papandreou to step down to pave the way for elections and a renegotiation of the bailout.
But Papandreou called for the opposition to "stop fighting in these critical times, stop sending the image that the country is being torn apart".
The cabinet hopes to push the reforms through by the end of June, but weeks of anti-austerity rallies, which turned violent last Wednesday, have created political uncertainty and spooked investors who fear public rage may weaken government resolve.
Workers at state utility PPC said they will launch a 48-hour strike at midnight to oppose government plans to sell it.
Papandreou was due to travel to Brussels on Monday to meet European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy.
Although euro zone finance ministers had been expected to agree on the release of a new 12 billion euro tranche of Greece's existing bailout on Sunday, Germany's finance minister said it would depend on Greece fulfilling its commitments.
"We will work today and tomorrow so that we get as far as possible," Wolfgang Schaeuble said in Luxembourg.
"Greece must fulfil all the necessary preconditions so that it can be paid out on time. Europe will do its part."
Schaeuble also said he intended to propose a compromise to the European Central Bank to permit private-sector involvement in the new bailout, German magazine Der Spiegel reported. This might remove an obstacle to private-sector rollover of Greek debt, which the ECB has so far opposed.
Papandreou said in his speech that a referendum would be held in the autumn on electoral and political changes including the responsibilities of ministers.
An opinion poll taken before the reshuffle showed 47.5 percent of respondents wanted parliament to reject the reform package and for Greece to hold an early election rather than allow Papandreou to finish his term, which ends in 2013.
Just over a third wanted the package approved so Athens could secure the second bailout, according to the poll in daily To Vima's Sunday edition.
Greece's international lenders asked for the five-year, 28 billion-euro austerity campaign after the Socialist government failed to meet the fiscal targets laid out in its original, year-old bailout.
Along with a call to sell off state firms to raise 50 billion euros by 2015, the plan envisions 6.5 billion euros in budget consolidation for 2011, almost doubling existing belt-tightening measures that have already driven unemployment to a record high and extended a recession into its third year.
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