Greek conservatives set themselves on a collision course with the European Commission on Tuesday, saying they would not bow to "dictates from Brussels" over a bailout designed to save their country from bankruptcy and safeguard the euro.
Members of the New Democracy party, a key player in Prime Minister Lucas Papademos's new national unity government, refused the Commission's request — repeated on Tuesday — to give a written guarantee to meet the terms of the bailout.
The crisis coalition government, uniting political rivals New Democracy, the Socialists of fallen Prime Minister George Papandreou and the far-right LAOS party, is expected to sail through a confidence motion on Wednesday.
But the conservatives' stance bodes ill for the new government's efforts to win Europe's trust and stave off a default that could spark its disorderly exit from the euro.
Finance Minister Evangelos Venizelos appealed for the support of parliament during the confidence debate.
"We will help ourselves and the eurozone if we do what we have to do now, quickly, responsibly, so that Greece can always be a member of the eurozone and for the eurozone to exist, to permanently overcome the risk of a default," he said.
"A final opportunity has presented itself for the country and we must take full advantage of it."
Athens will begin thrashing out a deal with private bondholders on Thursday to slash its public debt, sources said, tackling a key pillar of the 130-billion-euro ($176.05 billion) bailout plan agreed with eurozone leaders last month.
But even before that package is finalized, the European Commission said the coalition must first commit to the deal in writing to secure an 8-billion-euro loan from an earlier aid package that Athens needs to avoid bankruptcy next month.
"We expect this in writing. It has to be a letter and signed," Commission spokesman on economic and monetary affairs Amadeu Altafaj told reporters in Brussels.
"It has to convince the European partners of Greece that there is strong commitment and that it will be followed by decisive action by all political forces, whatever happens in the future elections of Greece."
New Democracy deputies echoed party leader Antonis Samaras's earlier refusal to sign a pledge.
"You know very well that such a thing is against our constitution," Prokopis Pavlopoulos, New Democracy's constitutional expert, told parliament. "You also know that even ... EU law itself does not bestow any such powers on ... the European Commission to request such a thing."
New Democracy MP Nikos Dendias said his party would help Greece avoid disaster but rejected bowing to outside pressure.
"Dictates from Brussels cannot be a legitimate policy," he told parliament during the confidence debate.
Analysts said one side or the other had to give.
"It could prove a stumbling block, especially if the EU Commission feels it's a sign that Greece is looking to wiggle out of various commitments," said Ben May, an economist at Capital Economics.
"But in the end it's in everyone's interest for progress to be made and to get the second bailout package, and some sort of compromise will be reached. A lot of this is posturing and one side will eventually give up."
While in opposition during Papandreou's administration, Samaras repeatedly provoked the ire of the international community by refusing to back an IMF-prescribed austerity drive that has slashed public spending and pushed taxes higher.
Samaras says the policy mix is wrong, plunging Greece deeper into recession instead of taking it out of a debt crisis. Data on Tuesday showed Greece's economy shrank 5.2 percent in the third quarter, sending Greek bank stocks 7 percent lower.
Economists predict a fifth year of recession next year and a total contraction of 15 percent from 2008 to 2012.
The government will submit a new budget to parliament on Nov. 18, Venizelos said. It will also complete long-delayed plans to overhaul the tax system by February and take measures to boost growth.
Greece needs to tap some 80 billion euros ($108.39 billion) worth of aid from the new bailout in the first two months of 2012, he added.
Failure to stay in the euro would plunge Greece back to the economic conditions of the 1960s, Venizelos said, evoking the dire poverty that forced many Greeks to emigrate to Germany and other western European countries.
Papademos, a former vice president of the European Central Bank, faces his first big public test on Thursday when thousands are expected to join an annual rally to mark the Nov. 17 student uprising in 1973 that helped topple the 1967-74 military junta.
The ranks of students and workers are likely to be swelled by middle-class Greeks who have diligently paid their taxes and social contributions and blame the nearly two-year-old crisis on a corrupt and quarrelsome political elite and rich tax evaders.
"We expect massive participation as rage and anger have been dwelling in people for so long," said Mary Bossis, international security professor at the University of Piraeus.
"It is very possible that some groups will misbehave."
In another sign of divisions within the coalition, 101 members of Papandreou's Socialist party signed a petition opposing the party's cooperation with New Democracy and LAOS.
Polls show Papademos enjoys the support of three in four Greeks, but he faces a tough three months as his task is to implement more painful tax rises and spending cuts and may have to pursue new steps if Greece misses more economic targets.
Elsewhere in Europe, European shares and the euro fell as investors dumped Italian and Spanish bonds. French debt yields also rose on fear of the crisis seeping into core economies.
Papademos's office said he would travel to Brussels next Monday to meet EU officials, but a report that "troika" inspectors from the EU, the ECB and the International Monetary Fund would arrive this week had still not been confirmed.
Once the cabinet clears the confidence vote, Greek and EU negotiators will begin fleshing out a deal with the Institute of International Finance, which represents banks, over a deal that will stick private bondholders with a 50 percent loss and slash Greece's 330-billion-euro debt load by a third.
"The aim is to have a conclusion soon on the final proposal that will be submitted to the private bondholders," a source at a major Greek bank who asked not to be named said. "There is no specific deadline for this."
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