Greek PM in crisis party talks amid debt crisis

ATHENS (AFP) - Prime Minister George Papandreou appealed for unity from his own lawmakers Thursday to beat Greece's debt crisis after two deputies quit and the IMF insisted there can be no back-sliding on agreed cuts. In a dramatic address to his Socialist party, the embattled premier said that both Greece and Europe as a whole were facing a pivotal moment in their history as he sought to nail down backing for an austerity package. "The challenge before us, the moment we are facing, is historic. Either Europe will make history or history will wipe out the European Union," he said. As a growing number of deputies went public with their criticism of the premier's plan to stave off bankruptcy, Papandreou urged "everyone to work together to overcome this crisis". "We have some tough negotiations ahead of us and the next few days will be crucial ... These are critical moments for the country and we must have stability." State television NET said the prime minister would push through with a planned reshuffle and then have a confidence vote on the new government slated for late Sunday at the earliest. Several deputies had earlier criticised a policy of cutbacks overseen by the EU and the IMF, which saved Greece from bankruptcy last year, that is deemed to have plunged the economy into an even deeper recession despite huge sacrifices. "For the past 18 months, efforts to deal with the problem have gone from bad to worse," Socialist lawmaker Nikos Salagiannis told reporters. "There is a governance gap," added deputy Dimitris Lintzeris. Two other Socialist lawmakers, former deputy ministers George Floridis and Hector Nassiokas, quit their seats in protest at the government's economic policies and the failure of talks with the conservative opposition to form a national unity administration. Greek lawmakers have been subjected to scathing verbal attacks for weeks by thousands of protesters gathered outside parliament to reject new planned cuts. But the International Monetary Fund (IMF) made clear on Thursday that its support for Greece was conditioned on the adoption of the agreed spending cuts. "We stand ready to continue our support for Greece subject to adoption of the economic policy reforms agreed with the Greek authorities," IMF spokeswoman Caroline Atkinson said in a statement. Papandreou, whose approval ratings are in free fall, has not indicated the extent of his reshuffle. However, Finance Minister George Papaconstantinou is widely rumoured to be slated for removal after increasing criticism from lawmakers. Despite a titanic effort to slash the country's soaring budget deficit, the adjustment ultimately fell short of target as a deeper-than-expected recession exacerbated by the austerity measures neutralised part of the cuts. Now Papandreou's government is locked in tough negotiations with its European peers for a new bailout after a previous EU-IMF rescue was deemed insufficient to get the recession-plagued Greek economy back on its feet. Greece has warned it will be unable to pay next month's bills without a 12-billion-euro loan instalment from the EU and the IMF, part of a broader 110-billion-euro bailout package agreed last year. A critical vote in parliament on a controversial new austerity package worth over 28 billion euros, demanded by Greece's creditors in return for the latest aid infusion, must be held by the end of the month. The crisis in Greece has alarmed governments across the 17-nation eurozone whose finance ministers will hold emergency talks in Brussels from Sunday. French President Nicolas Sarkozy urged EU members to "compromise" to protect the euro. "We need to defend our single currency and our European institutions," he insisted, on the eve of talks with German Chancellor Angela Merkel in Berlin. The single currency struck a three-week low against the dollar early Thursday diving as low as $1.4090 and hitting a level which was last seen on May 26. Around 1600 GMT it stood at $1.4146, down from $1.4182 late in New York on Wednesday. Many Greeks are angry that after billions of euros in spending cuts and tax hikes last year they are being asked to make more sacrifices. An estimated 40,000 people protested in Athens Wednesday as unions staged a crippling general strike, the third this year against the austerity cuts.

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