Greek bail-out survives as PM scrapes through vote of confidence

The result – 153 votes to 144 – avoided snap elections that would have torpedoed Greece’s bail-out deal and inflamed the eurozone’s economic crisis.

Mr Papandreou’s socialist government won with all his party MPs in the 300-member parliament supporting the government, but his term as prime minister appeared close to an end.

His Socialist party (Pasok) held a tiny majority – 152 out of 300 seats. The vote, which took place at about midnight in Athens, was timed to take place when the markets in Europe and the United States are closed, because of its sensitivity.

Earlier, Mr Papandreou called for a new coalition government to approve the €130 billion bail-out deal, which is vital for saving the country from bankruptcy and tackling the eurozone’s economic crisis, and signalled that he was ready to stand down

The prime minister told parliament before the vote that he would go to the president today to discuss formation of a broader-based government which would secure the eurozone bail-out, adding that he was willing to discuss who would head a new administration.

The 59-year-old had been fighting an open revolt from his own Socialist MPs sparked by his surprise announcement that he would put the new debt deal to a referendum.

Angry protesters, led by trade unions, gathered outside the Greek parliament last night as MPs debated the fate of the government.

But although Mr Papandreou scraped through, most observers believed his days were numbered. It was clear from opposition parties that he would not be able to form a government of national unity.

And the prospect of a new election caused horror among the leaders of the G20 countries, providing even more uncertainty over whether the bankrupt country would stick to its side of the deal in delivering austerity measures in exchange for a loan from the eurozone.

Mr Papandreou has now abandoned his controversial decision to hold a referendum on the deal with the eurozone after pressure from France and Germany and condemnation from his own finance minister, Evangelos Venizelos. Rejection of the deal by the Greek people could have forced the country out of the euro and led to it defaulting on its debts.

The week of unending drama in Athens, which has horrified its European partners, spooked the markets and overshadowed the G20 summit in Cannes.

Ahead of the confidence vote, it appeared that Mr Papendreou had lost the support of key members of his party.

A senior Socialist MP said last night that the government could now 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 bail-out and thrash out debt write-off details with banks.

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

But the conservatives do not want to wait. The New Democracy party leader, Antonis Samaras, insisted that Mr Papandreou had to go now, and demanded elections within six weeks.

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

“The electoral process takes about 40 days, and soon we will be unable to pay salaries and pensions, while nobody will be able to negotiate with us on the bail-out agreement,” he said.

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

The Socialists came to power in a landslide victory in 2009 and immediately discovered that Greece had falsified financial data for years.

Mr Papandreou has given no indication that he plans to resign soon, although he said he was not “glued to his seat”. But both his Socialist party and the conservatives are talking about elections.

The threat of a Greek default or exit from the euro worsened a European debt crisis that has already forced massive bail-out deals for Greece, Ireland and Portugal.

Yesterday, the Greek finance ministerspoke by phone to an array of European officials – German finance minister Wolfgang Schaeuble, Jean-Claude Juncker who chairs the eurozone’s group of 17 finance ministers, and European commissioner for monetary affairs Olli Rehn – to tell them officially the referendum was off.

Mr Venizelos also said the aim of the confidence vote was “to seek and achieve the broadest possible consensus and co-operation for the benefit of the country”.