PM presents stark choice between bailout, default

Prime Minister Lucas Papademos told the Cabinet on Friday that anyone objecting to the terms of Greece?s new bailout would have no place in the government, stressing that the alternative to the rescue plan agreed with foreign creditors was a catastrophic default that must be avoided at all costs.

?We cannot allow the country to go bankrupt,? Papademos said in a televised speech to the Cabinet.

A Greek bankruptcy would inevitably lead to an exit from the eurozone ?and the country would be dragged into a spiral of recession, instability, unemployment and misery,? he said.

?The priority now is to do whatever it takes to approve the new economic program and move forward with the new loan agreement,? the premier said. Papademos added that ?whoever disagrees and does not vote for the new program cannot stay in the government,? setting the stage for a reshuffle.

Sources suggested on Friday that the cabinet shake-up would probably take place on Monday following a parliamentary vote on the debt deal which is expected to take place late on Sunday.

Papademos was speaking a few hours after the leader of the right-wing Popular Orthodox Rally (LAOS) party, Giorgos Karatzaferis, said he would not support the new austerity measures as they were too harsh. His announcement was followed by five ministerial resignations, four from LAOS and one from socialist PASOK.

Transport Minister Makis Voridis, Deputy Merchant Marine Minister Adonis Georgiadis, Deputy Defense Minister Giorgos Georgiou and Deputy Agriculture Minister Asterios Rontoulis — all from LAOS — resigned following Karatzaferis?s speech. Two of them, Voridis and Georgiadis, said they would defy their leader and vote in favor of the debt deal.

Later on Friday, Deputy Foreign Minister Mariliza Xenogiannakopoulou also resigned, a day after Deputy Labor Minister Yiannis Koutsoukos stepped down in protest at the new austerity bill.

In total, six of the Cabinet?s 47 ministers and deputy ministers had resigned by late Friday.

The atmosphere in the ranks of PASOK was said to be tense, as sources put the number of likely dissenters at 15 or even 20. Only a handful have publicly stated their intention to vote down the deal.

The mood within PASOK was darkened by the resignation of Xenogiannakopoulou, as well as that earlier on Friday of Arta deputy Pavlos Stasinos, who however gave up his seat to another Socialist MP.

In a bid to curb further dissent, PASOK spokesman Panos Beglitis called on MPs to show ?a responsible stance and positive vote so that the country can safely emerge from the crisis.?

In conservative New Democracy, the level of dissent was said to be low, with only two or three MPs said to be considering voting ?no.? Sources said that ND leader Antonis Samaras plans to clarify during a session of his party?s parliamentary group on Saturday that any MPs going against the party line will be ejected. George Papandreou is due to address PASOK MPs on Saturday too.