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Greek MPs set to accept bailout deal

Unpopular austerity bill sets out €3.3bn in cuts to secure €130bn rescue package from the EU and IMF

Greek MPs look set to agree to a deeply unpopular bailout deal setting out €3.3bn in wage, pension and job cuts as the price of a €130bn rescue package from the European Union and International Monetary Fund.

The country needs the funds – its second rescue package since 2010 – before 20 March to meet debt repayments of €14.5bn, but the bill has stirred anger on the streets and turmoil within the coalition government.

Addressing the nation late on Saturday, the prime minister, Lucas Papademos, warned that failure to back the bill would mean a disorderly default and “set the country on a disastrous adventure”.

“It would create conditions of uncontrolled economic chaos and social explosion,” he said. “The country would be drawn into a vortex of recession, instability, unemployment and protracted misery and this would sooner or later lead the country out of the euro.”

Greece’s Communist party, which opposes the cuts, accused him of “lying and scaremongering”.

But the country’s eurozone paymaster Germany continued to pile pressure on the beleaguered Greek administration by saying that Europe needed action, not words. Berlin was instrumental in insisting that Athens made deeper cuts after the Greek government presented its budget plans at a eurozone meeting last week in a move that has widened the rift between the two countries.

“The promises from Greece aren’t enough for us any more,” the German finance minister, Wolfgang Schauble, said in an interview published on Sunday in Welt am Sonntag newspaper.

German opinion polls show a majority of Germans are willing to help, Schauble said, “but it’s important to say that it cannot be a bottomless pit. That’s why the Greeks have to finally close that pit. And then we can put something in there. At least people are now starting to realise it won’t work with a bottomless pit.”

“Greece needs to do its own homework to become competitive – whether that happens in conjunction with a new rescue programme or by another route that we actually don’t want to take.”

When asked if that other route meant Greece would have to leave the eurozone, Schauble said: “That is all in the hands of the Greeks themselves. But even in the event, which almost no one assumes will happen, they will still remain part of Europe.”

He said the rescue efforts for Greece were proving more difficult than efforts to unify Germany in 1990.

“The reason is the realisation that there is a need for change, and change dramatically, still needs to develop further with a lot of people in Greece.”

The 300-seat parliament is due to begin debating the bill at 2pm local time (12pm GMT) before a vote expected late in the evening.

Demonstrators have pledged to turn out in force at 6pm on the main square in front of the assembly, although rainy weather may limit the numbers of protesters.

The austerity measures include €300m in pension cuts and a 22% reduction in the minimum wage from about €750 a month. The bill aims to cut Greece’s bloated state-sector workforce by about 150,000 people by 2015. It also provides for a bond swap to ease Greece’s debt burden by cutting the real value of private investors’ bond holdings by some 70%.

On a day of dire warnings and stormy debate on Saturday, leaders of the ruling coalition told uneasy lawmakers to support the bill or be dropped from party lists for an election that could come by April.

At least 20 deputies from the two main parties in the Papademos coalition threatened on Saturday to vote no – but the bulk of the coalition’s 236 MPs are still all but certain to approve the package. Six members of the cabinet have resigned.

The finance minister, Evangelos Venizelos, said the deal had to be approved by Sunday or the country would miss a deadline on 17 February to offer the debt “haircut” to its private-sector bondholders.

Eurozone finance ministers also expect Greece to explain by then how €325m from this year’s total budget cuts, as yet unspecified, will be achieved before it agrees to the bailout.

Bailout documents released on Friday left blank the amount of the full rescue package, and Venizelos said Greece might need €15bn more to save the country’s banks, confirming estimates from EU officials.

The EU and IMF say they will not release the aid without clear commitments by the main party leaders that reforms will be implemented, whoever wins the next election.

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