PM to name new government

ATHENS: Greek Prime Minister George Papandreou was to name a new government on Friday after quashing a budding party revolt over his handling of a debt crisis that has raised fears of financial meltdown.

Mounting criticism by backbenchers in the Socialist party, which has a slim five-seat majority in parliament, delayed Papandreou's reshuffle by a day as time runs down on critical talks with Greece's creditors on a new bailout.

Papandreou was expected to replace Finance Minister George Papaconstantinou, unpopular in the party for an 18-month austerity drive which has failed to pull the economy out of recession and a damaging default tailspin.

He was also expected to promote current Defence Minister Evangelos Venizelos, an old party foe, and attempt to tempt former European Central Bank vice-president Lucas Papademos with a cabinet post.

Announcements on the new government are expected after 9:00 am (0600 GMT).

In a dramatic address on Thursday, the embattled premier said that both Greece and Europe as a whole were facing a pivotal moment in their history as he sought to nail down backing for an austerity package.

"The challenge before us, the moment we are facing, is historic. Either Europe will make history or history will wipe out the European Union," he said.

Papandreou's government is locked in tough negotiations with its European peers for a new bailout after a previous EU-IMF rescue was deemed insufficient to get the recession-plagued Greek economy back on its feet.

Greece has warned it will be unable to pay next month's bills without a 12-billion-euro loan instalment from the EU and the IMF, part of a broader 110-billion-euro bailout package agreed last year.

A critical vote in parliament on a controversial new austerity package worth over 28 billion euros, demanded by Greece's creditors in return for the latest aid infusion, must be held by the end of the month.

As a growing number of deputies on Thursday went public with their criticism of the premier's plan to stave off bankruptcy, Papandreou urged "everyone to work together to overcome this crisis".

Two Socialist lawmakers, former deputy ministers George Floridis and Hector Nassiokas, quit their seats in protest at the government's economic policies and the failure of talks with the conservative opposition to form a national unity administration.

Copyright AFP (Agence France-Presse), 2011