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Greek leader survives confidence vote despite austerity protests

By the CNN Wire Staff
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Greek PM wins backing for bailout cuts
  • NEW: Papandreou's government survives confidence vote
  • EU chief says Greece has "no alternative" to austerity plans
  • Greece plans to raise taxes, cut pensions and sell off assets as part of a bailout
  • A Greek default likely would send shock waves across the world economy

Athens, Greece (CNN) -- Greek Prime Minister George Papandreou's reshuffled Cabinet survived a vote of confidence early Wednesday despite widespread opposition to budget cuts he says are needed to prevent a government default.

International lenders have demanded Greece cut spending, lay off public workers, raise taxes and raise 50 billion euros ($71 billion) through selling off state-owned enterprises in exchange for another bailout deal for the cash-strapped nation. Weeks of protests against the austerity measures spurred Papandreou to shake up his government last week, leading to Wednesday's 155-143 vote.

Analysts warn that a Greek default could cripple the euro, the European Union's common currency, and send shock waves throughout the world economy. Lawmakers are slated to vote on the privatization plan and further tax increases, pension cuts and layoffs on June 30, and European Commission President Jose Manuel Barroso warned Greece risks being abandoned by both Europe and the International Monetary Fund if it fails to act.

"There is no alternative to this program. Let's face it," Barroso told CNN on Tuesday. "And that's why it has to be clear. We need Greece to deliver, and if Greece wants this program of support, Europe is ready to support it."

Greek Finance Minister Evangelos Venizelos said Tuesday he was encouraged by bipartisan support he received from main opposition leader Antonis Samaras on the austerity plan, which Venizelos said he would take to Eurogroup ministers July 3.

Harsh reforms designed to help reduce Greece's enormous budget deficit have so far led to tax hikes and public-sector job losses alongside already record-high unemployment. Papandreou faces opposition from within his own ruling socialists over the austerity measures needed to secure an additional bailout package.

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On Sunday, international lenders demanded that Greece stick with tough austerity measures and raise billions of euros by selling off state assets in exchange for further support. Airports, highways and state-owned companies as well as banks, real estate and gaming licenses will all go on the auction block.

On June 9, the Cabinet approved a tough five-year plan for 2011-15 and introduced a bill in Parliament to put austerity measures into effect. The government proposes reducing the public-sector workforce by 150,000; workers will also face changes in working hours, practices and wages, and the plan also sets out changes to social benefits, including pensions and unemployment aid.

Protests against those plans turned violent June 15 as demonstrators threw gasoline bombs at the Finance Ministry and police fired tear gas at protesters, police said. But Papandreou did not change course, telling lawmakers over the weekend, "The government must stop spending more than it takes in."

According to the Finance Ministry, these measures will help achieve 28.3 billion euros ($40.5 billion) in cuts from 2012 to 2015 and shrink Greece's public deficit to less than 3% of gross domestic product, in accordance with the EU target.

CNN's Diana Magnay and journalist Elinda Labropoulou contributed to this report.

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