Greece races for vast reforms after vote victory

After an ultimatum from their European peers, who want action on a promised overhaul of the ailing Greek economy, the ruling Socialists have set themselves a grueling task to overcome dissent from their own ranks in parliament.

The government pulled through a confidence vote without casualties early on Wednesday, with Prime Minister George Papandreou having called for support "to avoid bankruptcy and keep Greece in the euro core."

However the real fight will come when the actual austerity cuts face a vote by lawmakers by the end of the month.

"These next ten days are the most crucial in the last 30 years," Deputy Finance Minister Pantelis Ekonomou told Flash Radio.

Papandreou, who has staked his career on the country's recovery, set the tone early on Wednesday with a dramatic plea in parliament.

"We have a unique opportunity (to change the country)," he said.

"If we falter, if we lose heart and squander it... history will judge us very harshly," the prime minister said, admitting that the government faced a "superhuman task" to pull the country out of a debt tailspin.

The prime minister was to hold an inner cabinet meeting in the afternoon to approve a law for an austerity drive worth more than 28 billion euros ($40 billion) by 2015, his office said.

The measures also include a vast privatisation programme to raise 50 billion euros, but the plan faces deep opposition from some quarters.

Greece's main unions plan to hold a 48-hour general strike when the new austerity plan heads for parliamentary approval.

At stake in the vote due to be taken by the end of the month is obtaining a critical slice of the rescue loan agreed a year ago.

"Between 28th and 30th June the Greek parliament will debate the latest savings measures. In the end the decision on this matter will be decisive for the future of aid payments to Greece, not yesterday?s vote of confidence," the foreign exchange division at Germany's Commerzbank said in a report.

"(Socialist) members who were afraid of an early election last night will not necessarily vote in favour of the government?s fiscal policy," it said.

Without this immediate cash, Greece would not be able to pay its housekeeping bills next month, threatening a new and vicious twist to the eurozone debt crisis.

Also at stake is negotiation of a new huge rescue to avert default in the longer term, which Germany insists must be tied to participation by banks and funds holding Greek debt.

Top Greek ministers were also discuss the two-day European Union summit starting on Thursday, which will be overshadowed by risks of deep disturbance on European and even global markets.

The European Union, which last year rescued Greece from bankruptcy with a huge loan supported by the International Monetary Fund, set an ultimatum for Greece to enact the austerity and privatisation measures to qualify for the immediate loan instalment of 12 billion euros.

New Finance Minister Evangelos Venizelos, appointed in a sweeping reshuffle that brought a number of dissenters into government on Friday, hit hard in parliament on Tuesday.

"We have to pass two laws by June 30 so that procedures at the Eurogroup will move on July 3, enabling the IMF to decide to release the fifth loan instalment on July 8," Venizelos said.

At least two government deputies have threatened to vote against the sale of large stakes in public companies in their respective constituencies.

"Government secures mandate for critical decisions," financial daily Naftemboriki said on Wednesday, noting that the vote "gives a clear indication that the midterm plan and application law will (also) be approved so that the fifth loan slice will be disbursed."

Struck with repeated downgrades of its sovereign debt status by rating agencies, Greece has been unable to raise new long-term loans, which has forced the EU and IMF to begin work on the second rescue programme expected to be worth over 100 billion euros to keep the country afloat.

But most analysts argue that Greece will be ultimately unable to avoid defaulting on a debt currently exceeding 350 billion euros.

Rating agencies warn that even a supposedly voluntary debt restructuring could amount to default, and the European Central Bank has warned that if the crisis worsens it might have to cut off lifeline support for the Greek banking system.