Greek parliament faces crucial decision on austerity measures

“We are a breath away from Ground Zero,” Lucas Papademos said in a televised address on the eve of the vote, urging deputies to grasp their “historic responsibility” to secure the country's financial future.

Papademos warned of “economic and social catastrophe” if parliament failed to agree the cuts required to obtain a second massive bail-out from the EU and IMF, to the tune of 130 billion euros (US$171 billion), and avoid default.

The prime minister spoke late Saturday hours after thousands of protesters watched by riot police, demonstrated in Athens against the further belt tightening.

The country's unions held a 48-hour strike and have called a fresh demonstration on Sunday in front of parliament to protest what they say is the blackmail being imposed by the international troika of the EU, the IMF and the European Central Bank.

MPs will have to approve moves to recapitalize Greek banks, which may involve a degree of nationalization if they cannot get sufficient private money.

And they must back a bond swap which, after long and tortuous negotiations, has finally been agreed with private creditors.

That is designed to wipe out around 100 billion euros from Greece's 350 billion euro debt, reducing the country's massive debt burden to 120 percent of GDP.

If deputies reject the package however, Greece will not get the money it needs to stave off bankruptcy on March 20, when it has to repay nearly 14.5 billion euros in maturing debt.

“We look into the eyes of the Greek people with full consciousness of our historic responsibility. The social cost of this program is limited in comparison with the economic and social catastrophe that would follow if we do not adopt it,” Papademos said in his televised address.

“The standard of living of Greeks would collapse in the case of a disorderly bankruptcy. The country would drift into the long spiral of recession, instability, unemployment and prolonged misery.”

The state would be unable to pay salaries, pensions or even maintain basic services such as hospitals and schools, he warned.

“The program contains measures that should have been adopted long ago,” he said.

In a speech on Friday the premier warned that default would result in chaos.

“It would create conditions of uncontrolled economic chaos and social explosion ... sooner or later, (Greece) would be led out of the euro,” he warned.

Some MPs are certain to reject the package in the vote scheduled for 5:00 p.m. (1500 GMT).

The two remaining parties in the ruling coalition, PASOK the largest party and the conservative New Democracy are backing the measures and account for 230 out of a total of 300 deputies.

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