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Greece debates new austerity plans

Greek MPs have begun crucial debates on savage cuts that must be agreed this week if their debt-ridden country is to receive the critical next instalment of loans from its international bailout plan.

The deeply unpopular measures are expected to be voted on in parliament on Wednesday and Thursday. They must be passed for the European Union and International Monetary Fund to release the next 12 billion euro (£10.6 billion) batch of loans.

Without the funds, Greece runs out of money in mid-July and faces becoming the first eurozone country to default on its debts - a potentially disastrous event that could drag down European banks and affect other financially troubled European countries.

Prime Minister George Papandreou has a five-seat majority in the 300-member parliament, so should be able to pass the bills. However, he has faced an internal party rebellion over the measures, and at least two MPs have said they are considering not voting in favour.

The rebellion peaked in a political crisis earlier this month that almost led to a government collapse as Socialist deputies began resigning their parliamentary seats and cross-party talks to create a coalition government with the conservative opposition collapsed. Mr Papandreou faced down the revolt and bought time with a broad cabinet reshuffle in which he replaced his finance minister.

The main opposition Conservative party leader, Antonis Samaras, has withstood intense pressure from European officials to lend his backing to the bills. While he supports certain cost-cutting measures and privatisations, he says the overall thinking behind the austerity bill is flawed and he will vote against it.

The new plan runs two years beyond the current government's mandate to 2015 and will see increases to consumer and heating fuel taxes and a drop in the minimum limit for income tax, to 8,000 euros a year (£7,112).

The measures have already sparked widespread protests. Workers are to hold a 48-hour general strike, while groups of protesters who have been camped out in the capital's main Syntagma Square have vowed to encircle the parliament building on Wednesday to prevent MPs from entering and voting on the bill.

Ahead of the general strike, a communist party-backed union, PAME, held a protest at Greece's most famous ancient site, the Acropolis, hanging banners in English and Greek over the monument's walls reading: "The peoples have the power and never surrender. Organise counterattack."

Under the original bailout, from which Greece began receiving funds in May last year, it had been expected to be able to return to borrowing on the international bond market next year. But persistently high interest rates demanded for its bonds have essentially locked it out of that market, and it has become clear the country will need more help.

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