Greek Prime Minister George Papandreou faces a confidence votein his government today that may determine whether Greece becomesthe first euro-area country to default.

Tonight's vote caps a week of turmoil for Papandreou, who fendedoff a revolt from the ranks of his ruling socialist Pasok party inparliament last week. That came after opposition parties rejectedhis call for a national unity government. European Union leadershave insisted Papandreou secure multi-party support for austeritymeasures that are a condition of the aid needed to avoid default assoon as next month. A vote on the fiscal plan is due next week.

“Pasok now knows it has to close ranks,” said Holger Schmieding,chief economist at Joh. Berenberg Gossler & Co. in London. “Thesituation is volatile. A negative vote by the Greek parliamentcould trigger a serious crisis in Europe.”

The International Monetary Fund, contributor of a third of thebailout money for Greece, Ireland and Portugal, has warned Europeanleaders that a failure to take decisive action on the debt crisisrisks triggering “large global spillovers.” At the same time,Papandreou is struggling to convince Greeks to accept a 78billion-euro ($112 billion) package of state-asset sales and budgetcuts, which include a “crisis levy” on wages.

Cabinet Reshuffle
Papandreou, 59, now has155 seats in the 300-seat chamber after one Pasok deputy on June 14resigned from the party and declared himself independent in protestof the government's economic policies. Two days later, twosocialist lawmakers quit parliament, prompting Papandreou's partyto demand an emergency meeting and stoking investor concern thathis grip was slipping and the chance of default growing.

In an effort to shore up political support, Papandreou on June17 replaced finance minister George Papaconstantinou with EvangelosVenizelos, his defense minister and one-time rival for the partyleadership, in a cabinet reshuffle.

The debate on the confidence motion, which began on June 19,will end around midnight. Two days later, Papandreou hopes to meetEU leaders at a summit that will discuss a new financing package toshield Greece from record borrowing costs for as many as threeyears. If Papandreou survives tonight's vote, he will seek approvalin parliament next week for his five-year economic plan.

'National Unity'
Euro-area finance chiefs,pushing Greece to pass the laws needed to cut its deficit and sellstate assets, yesterday left open whether the country will get thefull 12 billion euros promised for July as part of last year's 110billion-euro lifeline.

Greek bonds and European stocks fell after that decision. Theyield on Greece's 10-year bond climbed 41 basis points to 17.35percent. Today the yield was at 17.26 percent at 2:07 p.m. inFrankfurt. Finance ministers will meet again July 3 to decide onGreece's loans.

“Greece's national unity has become a pre-requisite for ourpartners,” Venizelos, 54, said after his first meeting withEuropean counterparts in Luxembourg yesterday. “It should have beenthe nation's self-preservation instinct.”

'Policy Mix'
Venizelos said EU partnersrequired the parliament to vote through the fiscal plan as well asa bill on implementing the plan by June 30, according to ane-mailed statement from the Athens-based Finance Ministry today.References to national unity pointed to the “need for a climate andatmosphere of unity and responsibility,” he said.

Defeat tonight would embolden the opposition and could lead toelections, giving Antonis Samaras, leader of New Democracy, thelargest opposition party, the opportunity the pursue his vow torenegotiate the package.

“We cannot support a further policy mix exactly in line with thefirst policy mix which hasn't produced any of the results,” NotisMitarachi, alternate head of economic policy for the oppositionparty, told Maryam Nemazee on Bloomberg Television yesterday. “Weagree on the goals of the program but we disagree on the policy mixthrough which it's implemented.”

'Better Than Even'
Schmieding said thereis “a better than even” chance Papandreou will win the vote ofconfidence after the reshuffle.

“Putting party stalwart Venizelos at the top of the financeministry improves the chances that Pasok will stick together,” hesaid. “It is a close call.”

More than 47 percent of 1,208 Greeks surveyed by Kapa ResearchSA for To Vima newspaper oppose the new austerity measures and wantearly elections. Almost 35 percent said the package should beapproved.

Unions have called strikes against the measures. The trade unionat Public Power Corp SA began rolling 48-hour strikes yesterday,forcing the company to conduct scheduled power cuts to prevent ablackout.

Protests outside Parliament House are held on a daily basis,prompting leftist Syriza leader Alexis Tsipras to call thegatherings “a new lower house” of parliament. Another demonstrationis planned as lawmakers vote on the motion tonight.

Papandreou has promised to call a referendum later this year onchanges to the country's political system and constitution to allaydemonstrators' concerns.

Elected in 2009, Papandreou first sought a financial rescue inApril 2010 to avoid default as investors refused to finance arecord budget deficit. The conditions attached to the aid havehelped deepen a slump that has driven the economy into recessionfor a third year, lifted unemployment to 15.9 percent and fueledpopular discontent and unrest.

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