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Greek PM vows to battle debt crisis

Greek prime minister George Papandreou has vowed to stay on and fight to pull his country out of a crippling debt crisis, facing down a revolt from within his governing Socialists over new austerity measures.

Greece has been gripped by a major political crisis over a new five-year package of austerity measures demanded by creditors.

The political turmoil reached such a crescendo on Thursday that it spooked markets and forced a top European Union official to say Athens would receive enough rescue loans to avoid a summer default.

Talks to form a Greek coalition government with rival Conservatives collapsed on Wednesday, and the country's political crisis deepened on Thursday as Mr Papandreou saw two of his Socialists resign.

The party feud was the latest crisis to heighten worldwide concern that a Greek financial collapse could trigger panic elsewhere in the 17-nation eurozone - a fear that saw borrowing costs in vulnerable EU countries surge and stock markets come under pressure.

"We will prevail and we will hold on. We have as a country in the past successfully faced major crises. As hard at this struggle is, we cannot run away from our fight," Mr Papandreou told party politicians in an emergency meeting in parliament. We will fight and we will win, for Greece, its people and the future of the new generations."

The prime minister said he would keep seeking a consensus with the opposition over the financial reforms that creditors have demanded as part of an international bailout. "I will serve and continue to serve the effort for broader consensus and we hope that this effort ultimately is successful," he said. "But I have learned to battle on my own."

He also admitted his government had displayed "mistakes and weaknesses", but promised a new, stronger cabinet in a reshuffle expected to be announced later. on Thursday.

Mr Papandreou is trying to push through a five-year austerity programme worth 28 billion euro (£24 billion) that has been demanded by international creditors. The new spending cuts and taxes have spurred violent street protests as well as the party rebellion.

In Brussels, top EU finance official Olli Rehn said eurozone ministers would likely agree Sunday to give Greece the next 12 billion euro (£10.4 billion) instalment of loans from the 110 billion euro (£96 billion) bailout package.

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