Greek communist parties hold banners at Athen's Acropolis hill.

Image: Petros Giannakouris/AP

THE GREEK GOVERNMENT has warned rebel members of its parliament that any refusal to back the latest package of austerity measures could force the country into a dangerous default.

The country’s 300 MPs will vote tomorrow on whether to back the deal reached by leaders of the national coalition earlier this week, plunging the country into further austerity.

The deal is required so that Greece can finally secure its second €130 billion bailout from the EU and IMF – without which it will be forced to default, given the bonds it must repay in the coming weeks.

A fresh package of cost-cutting measures was approved by the cabinet last night, as premier Lucas Papademos – who is only in charge of the country until a new election can be held this year – warned that a “disorderly default would plunge our country in a disastrous adventure.”

Reuters quotes deputy finance minister Filippos Sachinidis as warning that any failure to secure the deal would lead to “incalculable” consequences for Greece, putting it on “an unknown, dangerous path”.

“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.

‘Disastrous’

Eurozone finance ministers, meeting earlier this week, refused to sign off on releasing the new €130bn package until the deal is ratified by the parliament.

The new package is also seen as a prerequisite in order for Greece to continue talks with its private bondholders, who have been reluctant to strike a deal on writing down the value of their bonds without Greece making a firm effort to cut its government spending.

Although the national coalition should (in theory, at least) a massive majority in the parliament, a number of figures from the 48-member cabinet have already declared their opposition to the deal.

It remains to be seen how many other ministers may yet oppose it, and how many members of the parliament they could bring with them.

Among the proposed measures are 15,000 public sector job cuts, cutting the minimum wage by around a fifth, and liberalising labour laws – including the abolition of a two-month ‘holiday pay’ bonus paid to many public servants.

The WSJ said the government also proposes to borrow €35 billion from the European Financial Stability Facility in an attempt to buy back its own bonds from the European Central Bank, in a bid to transfer debts from the ECB to the EFSF, which is more likely to be flexible on cutting interest rates or offering a write-down.

The deal has unsurprisingly been rejected by the public, with trade unions holding a 48-hour strike to coincide with this weekend’s parliamentary debates.

Greece: Clashes in Athens, ministers resign

‘Memorandum macht frei’: how one Greek paper views the second bailout

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