Greece's Prime Minister George Papandreou faces crucial confidence vote

Athens: Greek lawmakers geared up for a crucial confidence vote in the beleaguered Socialist government on Friday, as both main parties floated plans to approve a massive European bailout and call new elections.

A week of political drama has horrified the indebted country's European partners and overshadowed the Group of 20 Summit in the French resort of Cannes. The threat of a Greek default or exit from the common euro currency spooked global markets and worsened a European debt crisis that has already forced massive bailout deals for Greece, Ireland and Portugal.

Prime Minister George Papandreou's governing party has a tenuous majority of two in the 300-seat Assembly, but at least one Socialist lawmaker has threatened not to back him.

Faced with a revolt in his own party and heavy international pressure, Papandreou on Thursday abandoned plans for a referendum on Greece's latest international bailout agreement. The referendum proposal sparked a global crisis, as investors feared that rejection of the hard-fought debt relief plan would force a disorderly Greek default.

Finance Minister Evangelos Venizelos spoke by phone Friday with German Finance Minister Wolfgang Schaeuble, Jean-Claude Juncker, who chairs meetings of the eurozone's 17 finance ministers, and EU's Monetary Affairs Commissioner Olli Rehn to officially tell them the referendum is off.

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The minister told them the aim of Friday's confidence vote was "to seek and achieve the broadest possible consensus and cooperation for the benefit of the country, with the creation of an equivalent government."

The ministry did not explain what that meant. It did say Greece "must be able to be validly represented" at a eurogroup meeting Monday in Brussels and present the political guarantees necessary for the country's international creditors to release the next, vital batch of bailout loans.

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The new debt deal would give Greece a euro130 billion ($179 billion) rescue package - on top of the euro110 billion ($152 billion) it was granted a year ago. It would also see banks forgive Athens 50 percent of the money it owes them, some euro100 billion ($138 billion). The goal is to reduce Greece's debts to the point where the country is able to handle its finances without constant bailouts.

If the deal stalls, Greece will not get the next euro8 billion ($11 billion) installment of its loans and will probably go bankrupt before the year is out.

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Papandreou has given no indication that he plans to resign shortly, although he said Thursday he was not "glued to his seat." But both his Socialist party and the opposition conservatives are talking about elections - though they differ strongly on the timing.

A senior Socialist lawmaker said on Friday if the government wins the late-night confidence vote, it can then launch talks with the opposition conservatives on forming a caretaker administration to lead the country through the next few crucial months, when Greece must approve the bailout and thrash out debt write-off details with banks.

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Christos Protopappas said elections could then be held in February or March.

"We need three or four months ... to rationalize the situation, restore calm to the country, get rid of that euro100 billion in debt and build international credibility," Protopappas told state NET radio. "Then we can get back at each others' throats for a month with elections - at that point everyone will be able to wait for us."

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The conservatives don't want to wait. An angry New Democracy party leader Antonis Samaras insisted Thursday that Papandreou has to go now, and demanded elections within the next six weeks.

"Mr. Papandreou pretends that he didn't understand what I told him," he said. "I called on him to resign."

Protopappas argued that holding early elections now would drive Greece to bankruptcy.

"The electoral process takes about 40 days, and soon we be unable to pay salaries and pensions, while nobody will be able to negotiate with us on the bailout agreement," Protopappas said.

Polls indicate the Greek public is close to the breaking point after more than 20 months of harsh austerity cuts and tax hikes, and waves of general strikes and protests have often degenerated into riots. Recent opinion surveys show 90 per cent of Greeks oppose Papandreou's policies and his party has just 20 per cent public support.

The Socialists came to power in 2009, and immediately discovered that, under the ousted conservatives, Greece had falsified financial data for years.

A labour union plans to protest outside parliament later Friday.