Greece warns bailout rebels of unknown, dangerous path (Reuters)

ATHENS (Reuters) ? Greek leaders told a growing band of rebellious lawmakers Saturday to back a deeply unpopular EU/IMF rescue in parliament or send the nation down "an unknown, dangerous path" to default, international economic isolation and a deeply devalued drachma.

Conservative leader Antonis Samaras, who has attacked austerity policies for driving Greece ever deeper into recession, still told his party to back the 130 billion euro deal or be dropped as candidates in the next election.

With voters deeply hostile to the bailout's tough conditions, former socialist Prime Minister George Papandreou admitted that backing austerity had cost him the premiership and even some of his friends, but the alternative was a collapse in living standards and further "unforeseeable consequences."

The coalition of Prime Minister Lucas Papademos has a huge majority, which should ensure parliament approves Sunday a package including a further 3.3 billion euros in budget cuts this year, needed to secure Greece's second bailout since 2010.

But the number of dissenters is growing. About 20 MPs belonging to the two major parties backing Papademos shrugged off their leaders' threats and warned they might reject the bailout. It would take more than 80 rebels to scupper the law.

Six members of the Papademos cabinet have already resigned over the heavy pay, pension and job cuts the European Union and International Monetary Fund are demanding as the price of the funds, which Greece needs by next month to avoid bankruptcy.

INCALCULABLE CONSEQUENCES

"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 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 brought thousands out on the streets in protest.

On the second day of a 48-hour protest strike, about 50 Communist party activists draped two huge banners on the ramparts of the Acropolis Saturday, reading: "Down with the dictatorship of the monopolies (and the) European Union."

About 7,000 protesters gathered in Athens, police said, but there was no repeat of the teargas and petrol bombs of Friday.

SAMARAS CRACKS THE WHIP

Members of the conservative New Democracy party, which has a big lead in opinion polls before elections possible in April, are likely to back the deal solidly. Six have threatened not to.

"This is obviously an issue of party discipline," Samaras told his lawmakers in parliament, warning anyone who voted 'No' "will not be a candidate in the next election."

Papandreou, who negotiated the first bailout before his government collapsed in November, acknowledged the pressure.

"I've lost friends, my family suffered, I gave up my office, I was insulted, vilified, like no other politician ever was in this country," he told PASOK's parliamentary group.

"Still, all that is nothing compared with what our people will suffer if we fail to do the right thing."

Party discipline is much weaker at PASOK, whose support has dived to 8 percent in the latest opinion from the nearly 44 percent it commanded when Papandreou led it into power in 2009.

Analysts expect parliament to pass the deal, which includes a bond swap to ease Greece's debt burden by cutting the real value of private investors' bond holdings by some 70 percent.

The chief negotiator for private creditors in the debt swap deal, Charles Dallara, urged a 'Yes' vote, saying the deadlines allowed "no room for slippage."

In comments published Saturday, Dallara, who is managing director of the International Institute of Finance (IIF), said private creditors were committed to a voluntary agreement and that he expected a "very high participation rate."

"It is important for lawmakers to understand what is at stake," Dallara told Kathimerini newspaper.

Lawmakers need to approve the deal by Sunday, otherwise the country will not make a February 17 deadline to submit a debt swap offer to its private-sector bondholders, Finance Minister Evangelos Venizelos said Saturday.

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

Bailout documents released Friday left blank the amount of the rescue. Venizelos said 15 billion euros more might be needed to rescue the country's banks, confirming estimates from EU officials.

The banks are up to their necks in Greek government debt, the value of which will be slashed under the bailout, and have suffered huge losses of deposits as Greeks have either shipped their savings abroad or stuffed them under the mattress.

EU EXASPERATION

The EU and IMF have been exasperated by a series of broken promises and weeks of wrangling over the bailout. They will not release the aid without clear commitments by the main party leaders that reforms will be implemented, whoever is in power.

The uncertainty has upset world financial markets, with stocks snapping a five-day winning streak Friday and the euro tumbling.

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, as well as health and defense spending cuts.

"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 services markets, cut spending, and push through a privatization plan.

One of the attached documents, which spells 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 GDP by 2020 from about 160 percent now will be achieved.

(Writing by David Stamp; Editing by Jon Boyle)

Source: http://us.rd.yahoo.com/dailynews/rss/eurobiz/*http%3A//news.yahoo.com/s/nm/20120211/bs_nm/us_greece

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