Greece Warns Bailout Rebels of 'an Unknown, Dangerous Path'

The Greek government told rebellious lawmakers on Saturday to back a deeply unpopular European Union/International Monetary Fund rescue package in parliament or send the nation down an unknown, dangerous path to default and international economic isolation.

Officials hammered home the message that Greece's future in the Eurozone was at stake, and they dismissed any suggestion that leaving the common currency offered an easy way out of the country's crisis, which has already plagued it for more than two years.

In theory, the coalition of Prime Minister Lucas Papademos has a huge majority, which should ensure that parliament on Sunday will OK a package that includes an additional 3.3 billion euros in budget cuts this year, which is needed to ensure a 130 billion euro bailout by the EU and IMF.

However, six members of his cabinet have already resigned over the deep austerity measures that the EU and IMF are demanding as the price of the funds, which Greece needs by next month to avoid bankruptcy.

The consequences of disorderly default would be incalculable for the country -- not just for the economy ... it will lead us onto an unknown, dangerous path, Deputy Finance Minister Filippos Sachinidis said.

In an interview with the newspaper Imerisia, he described the catastrophe he believes Greece would suffer if it failed to meet debt repayments of 14.5 billion euros due on March 20.

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.

Late on Friday, the cabinet approved the draft bailout bill and a plan to ease the state's huge debt burden, which has deepened the nation's political and social crisis and led thousands to join street demonstrations.

Protest on the Acropolis

As a 48-hour protest strike went into its second day, about 50 Communist party activists draped two huge banners on the ramparts of the Acropolis, reading: Down with the Dictatorship of the Monopolies [and the] European Union.

Government representative Pantelis Kapsis acknowledged that parliamentary deputies, who face elections possibly as early as April, were under intense pressure in terms of public opinion, but said they still had to save the nation by voting for the bill.

Tomorrow, deputies will be called upon to bear a heavy burden under intense pressure from society, he told the state TV channel NET.

Analysts expect parliament to pass the package, which involves heavy pay, pension, and job cuts, on Sunday after a parliamentary committee discusses it on Saturday.

However, the political situation is unstable and a number of lawmakers have said they would vote against it. The smallest party in the coalition, the far-right LAOS, quit the government on Friday, ordering its four cabinet members to resign. Two members of the Socialist PASOK party have also quit the cabinet.

Kapsis said Greeks faced a hard decade and rejected any suggestion that leaving the euro might be an easier option. Staying in the Eurozone requires discipline for 10 years, he said. It is at such difficult moments that nations are put to the test... we must at all costs avoid bankruptcy, he said.

Some economists have suggested that if Greece defaulted and left the Eurozone, its new national currency would dive in value and allow the Greek economy to become internationally competitive.

However, Kapsis said: We'll have to reduce the deficit, regardless of whether we have the euro or not.

Eurozone finance ministers have told Greece that it must explain how 325 million euros ($430 million) of this year's total budget cuts will be achieved before it agrees to the bailout.

EU/IMF Exasperation

The EU and IMF have been exasperated by a series of broken promises and weeks of disagreement over the terms of the bailout, which would be Greece's second since 2010. They will not release the aid without clear commitments by the main party leaders that the reforms will be implemented, regardless of who wins the coming elections.

The uncertainty has upset world financial markets, with stocks snapping a five-day winning streak on Friday and the euro slumping as planned wage and pension cuts in Greece hit a new obstacle.

Outside Greece's parliament, police fired tear gas on Friday at black-masked protesters who threw stones, petrol bombs, and bottles at the start of the 48-hour general strike against the cuts ordered by the so-called troika of international lenders, which include the European Central Bank.

But the most recent street protests against the austerity -- which many Greeks blame on Germany -- were relatively small compared with last year's mass rallies.

Exact Amount Left Out

The bill, approved by the cabinet along with hundreds of pages of accompanying documents, sets out reforms including a 22 percent cut in the minimum wage, pension cuts worth 300 million euros this year, and health and defense spending cuts.

But it does not spell out the exact amount of the bailout, which is left blank. Eurozone officials have said another 15 billion euros may be needed for the recapitalization of Greek banks after the debt swap.

The government believes that sustained implementation of this policy program, complemented by debt restructuring, will put the public debt on a clear downward path, it says in a draft letter to EU and IMF chiefs, attached to the bill.

In the same letter, the government promises to speed up implementation of reforms in the labor, product, and service markets, cut spending, and push through a privatization plan.

Papademos, who was parachuted in last November to clinch deals on the bailout and a debt-swap deal, told his cabinet that anyone who did not back the bill had to go. It goes without saying that whoever disagrees and does not vote for the new program cannot remain in the government, he said in televised remarks.

A minister who took part in the cabinet meeting later said the draft bill was approved. The text also lays out the legal groundwork for a debt-swap plan in which private-sector bondholders will agree to take a real loss of 70 percent to help bring the country's debt down.

One of the attached documents, spelling out the reforms Greece will have to undertake in return for the aid, says the target of cutting the debt to about 120 percent of gross domestic product by 2020 from about 160 percent now will be achieved.

($1 = 0.7582 euros)

(Reporting by Harry Papachristou and Lefteris Papadimas; Writing by Ingrid Melander; Editing by Jon Boyle)