Greek ruling party in uproar amid debt crisis

Protests have broken out amid austerity cuts Greece's ruling party was in uproar Thursday after two lawmakers defected as Prime Minister George Papandreou struggled to form a new government amid a deepening debt crisis. The defections struck as Papandreou  faced a pressing deadline to name a new team before continuing reform efforts and bailout talks with creditors.
The deputies, former deputy ministers George Floridis and Hector Nassiokas, yielded their seats in protest over the government's economic policies and the failure of talks last night 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.
A prominent Socialist cadre Vasso Papandreou demanded an "immediate" meeting between ruling party deputies to discuss the crisis while the IMF voiced concern and France's President Nicolas Sarkozy called for a show of unity from Europe.
Papandreou, whose approval ratings are in free fall as he struggles to enforce an unpopular overhaul of the ailing Greek economy, on Wednesday also announced a confidence vote as fears grew of a disastrous debt default that could rock the eurozone.
The prime minister, who turns 59 on Thursday, said he intended later in the day to "form a new government and will immediately ask for a vote of confidence in parliament" but did not indicate the extent of the reshuffle.
However, Finance Minister George Papaconstantinou is widely rumoured to be slated for removal after increasing criticism from ruling party lawmakers on the halting course of Greece's economic recovery.
The new government is expected to be sworn in on Friday while the confidence vote could be held as early as Sunday, a parliament source said.
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 ($40 billion), demanded by Greece's creditors in return for the latest aid infusion, must be held by the end of the month.
A special adviser to the managing director of the International Monetary Fund, Min Zhu, said the body was concerned about uncertainty in Greece and ready to provide support.
"The situation changed very dramatically in the last 24 hours," he said in Paris.
"There is a lot of uncertainty... We are working extremely hard on this issue. We are ready to provide support... It's an absolutely important issue today for Greece, for Europe and for the whole global economy."
President Nicolas urged EU members to "compromise"to protect the euro.
"We need to defend our single currency and our European institutions," he insisted, one day before he was due to travel to Berlin to meet Chancellor Angela Merkel for crisis talks on the eurozone economy.
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.
The protest was marred by clashes between police and stone-throwing youths that injured dozens and led to 16 arrests.
The police said 36 of its officers were hurt while the health ministry said another 33 people were hospitalised, mostly for bruises and respiratory complaints from the extensive use of tear gas by riot police.