BREAKING NEWS! BBC ‘Greek government survives confidence vote’

21 June 2011 Last updated at 22:01 GMT

Greek government survives confidence vote

Outside parliament, thousands of protesters chanted slogans against austerity measures

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Greece crisis

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The Greek government has won a critical vote of confidence in parliament as it struggles to win support for extra austerity measures and avoid a default.

Prime Minister George Papandreou’s new cabinet was approved by 155 votes to 143, with two abstentions.

MPs will now be asked to approve 28bn euros (£25bn) of cuts, tax rises, fiscal reforms and privatisation plans.

Eurozone ministers say the legislation must be passed to receive a 12bn-euro loan Greece needs to pay its debts.

Earlier, thousands of people gathered outside the parliament building in Athens to protest against both the austerity measures and politicians in general.

Mr Papandreou reshuffled his cabinet and replaced his finance minister last week after weeks of demonstrations against his handling of the crisis.

‘Moment of truth’

Just before Tuesday’s confidence motion, the prime minister told MPs that the last thing their country wanted now was an election.

“We all have to agree that we will put an end to deficits,” he said.

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What went wrong in Greece?

Greece’s economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money.

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“We want to make a leaner, healthier state, because otherwise our country cannot take the burden.”

Mr Papandreou’s government must now persuade parliament to approve a five-year package of 28bn euros of tax increases and spending cuts by 28 June.

It must then push through laws implementing the reforms in time for an extraordinary meeting of eurozone finance ministers on 3 July.

The eurozone ministers on Sunday announced that they would withhold the payment of the latest tranche of the European Union and International Monetary Fund’s 110-bn euro bail-out package until the laws were in place.

Greece needs the loan to be able to keep up with payments to the creditors of its 340bn euros of debts, which amounts to 30,000 euros per person.

European Commission President Manuel Barroso warned that Greece faced a “moment of truth” and needed to show it was genuinely committed to the reforms needed to avoid a sovereign default.

Acting IMF chief John Lipsky echoed the comments, saying Greece’s fiscal system was broken but could be fixed with the right political will.

The eurozone finance ministers also agreed on Sunday to put together a second bailout package worth 120bn euros. The new aid package, to be outlined by early July, will include loans from other eurozone countries.

It will also feature a voluntary contribution from private investors, who will be invited to buy up new Greek bonds as old ones mature.