Greek prime minister faces knife-edge survival vote (Reuters)

ATHENS (Reuters) ? Greek Prime Minister George Papandreou faces a cliff-hanger confidence vote on Friday after his plan for a referendum on an EU/IMF bailout -- supposed to save both Greece and the euro zone from disaster -- backfired spectacularly.

But even if his socialist government survives the late-evening parliamentary vote, Papandreou's days as premier looked numbered amid opposition calls for his resignation and a deal with his cabinet under which, government sources said, he agreed to quit after negotiating a coalition with conservative rivals.

Much of Greece and many European leaders reacted with horror after Papandreou abruptly announced on Monday that he would put the 130-billion-euro ($180 billion) rescue plan, agreed at a euro zone summit only last week, to the Greek people.

After a tumultuous day in Greek politics, the chances of the referendum being held dwindled to almost nothing on Thursday. Papandreou offered to drop the idea anyway if the conservative opposition backed the bailout in parliament.

He came out fighting, rejecting opposition demands, in public at least, that he make way for a caretaker administration with just two tasks: forcing the bailout through parliament without a referendum and calling a snap election.

However, analysts said Papandreou may not be around much longer to fight such battles.

"The prime minister's position is very difficult, since he chose not to respond to the opposition's proposal for a transitional coalition government. Therefore I believe that it is unlikely that he will win the vote," said Costas Panagopoulos, head of ALCO pollsters.

Through waves of austerity policies demanded by Greece's international lenders, Papandreou has carried the parliamentary group of his PASOK party with him, despite much grumbling within the ranks.

But a steady trickle of defections has reduced his majority to the point that one or two waverers could inflict a defeat in the confidence vote, expected as late as midnight (6 p.m. EDT).

"We are like goldfish, waiting with our mouths open," writer Petros Tatsopoulos told Greek television, referring to the unfolding political drama. Greeks gripped by the events gathered around newsstands to catch a glimpse of headlines on Friday.

PASOK has 152 deputies in the 300-member parliament. But lawmaker Eva Kaili said that while she would stay in the party, she would refuse to back the government in the confidence vote, meaning Papandreou could count at most on the support of 151 deputies.

Only one more defection would strip the government of its majority and probably trigger an early election.

The financial daily Kerdos captured the mood with its headline: "Everything on a knife-edge," while the pro-government daily Ta Nea ran with: "A balancing act on the edge of a cliff."

Asian shares rose more than 2 percent and the euro steadied on hopes the referendum would be abandoned. But investors remained cautious about the confidence vote and the impact of any election.

"If Greece is heading for a general election and no party looks able to win an outright majority, which appears quite likely now, then the crisis will only deepen," said Teppei Ino, currency strategist at the Bank of Tokyo-Mitsubishi UFJ.

TOOTH AND NAIL

Greeks have fought tooth and nail against policies which have brought spending cuts, tax rises and job losses, pushing the nation into three years of recession, and they have staged a series of strikes and protests, some of which turned violent.

So a "no" vote in any referendum would be highly likely, even though this would cut off Greece's last international financial lifeline and risk spreading its debt crisis to much bigger euro zone economies, such as Italy and Spain.

But the criticism that rained down on Papandreou forced him to backtrack on the plan. Instead, he shifted the focus to negotiating with the conservative New Democracy party, saying the national interest ranked well above his personal ambitions.

"I'm not tied to my post. I'm not interested either in being re-elected, I'm only interested in saving the country," he told parliament.

Papandreou also called on his PASOK party to rally behind him in the confidence vote. But his public bravado appeared to mask an acceptance that his term may come to an end soon.

Government sources said Papandreou had struck a deal at a cabinet meeting on Thursday under which he would stand down after he had negotiated a coalition agreement with the conservative opposition -- provided he survives Friday's vote.

Ministers involved in striking the deal with Papandreou, led by Finance Minister Evangelos Venizelos, said he should go for the sake of their PASOK party, said the sources, who had knowledge of Thursday's meeting of the cabinet.

"He was told that he must leave calmly in order to save his party," one source told Reuters on condition of anonymity. "He agreed to step down. It was very civilized, with no acrimony."

Papandreou admitted he had made a mistake in calling on Monday for the referendum on a bailout, the sources said.

German Chancellor Angela Merkel and French President Nicolas Sarkozy summoned Papandreou and Venizelos to Cannes on Wednesday where they made clear Greece would receive no EU aid if the nation failed to stick to the rescue conditions.

(Additional reporting by Reuters Athens bureau; Writing by David Stamp; Editing by Mark Heinrich)

Source: http://us.rd.yahoo.com/dailynews/rss/eurobiz/*http%3A//news.yahoo.com/s/nm/20111104/wl_nm/us_greece_referendum

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