A backbench lawmaker resigned from Greece's governing Socialists on Tuesday to protest a new austerity drive, eroding Prime Minister George Papandreou's majority and raising the specter of further defections ahead of a crucial vote this month.
Former sports minister Giorgos Lianis will retain his seat as an independent in the 300-member parliament, according to the governing PASOK party, which now controls 155 seats -- a majority of five.
The defection came a day after barely-solvent Greece was accorded the lowest sovereign credit rating in the world, over fears private investors will have to share the burden of a potential debt restructuring.
Standard and Poor's rating agency slashed the country's rating from B to CCC, warning of the likelihood of one or more defaults over the next couple of years as the country struggles to meet its colossal financing requirements.
The agency also cited risks from internal political disagreements surrounding new cutbacks and privatizations, which Papandreou must push through Parliament to secure disbursements from a euro110 billion international bailout package -- without which the country would default in weeks.
Earlier Tuesday, another PASOK deputy said he would oppose the new austerity plan, which several others have strongly criticized.
"I have made my decision," Alexandros Athanassiadis said. "I cannot vote for the midterm plan that will change things in my country in such a way."
The measures combine euro28 billion worth of new cutbacks and tax hikes by 2015 with an ambitious euro50 billion privatization program.
Opposition parties have rejected repeated government appeals for cross-party consensus on the cutbacks, despite a series of sharp nudges from European officials, while labor unions have called a 24-hour general strike Wednesday.
The walkout is expected to stop all train and ferry services, close schools and public services and leave hospitals operating with emergency staff. Flights will not be disrupted.
Early Wednesday, protesters who have been demonstrating peacefully outside Parliament in Athens for the past three weeks say they will try to blockade the building, while unions are planning protest marches through the city center.
But the need for drastic fiscal action was again underlined Tuesday, when the finance ministry said it had missed its deficit reduction figure by over a billion euros -- mainly due to a revenue shortfall amid a deeper than expected recession.
A ministry statement said the January-May budget deficit was euro10.27 billion on a cash basis, compared with a target of euro9.07 billion. Spending cuts exceeded targets, but the revenue shortfall was nearly euro2 billion.
The country's public debt is expected to reach euro350 billion ($502 billion) this year, or more than 150 percent of gross domestic product, and it looks highly unlikely that Athens will be able to meet all of its obligations on time.
Standard and Poor's warned of the likelihood of one or more defaults as the country grapples to meet its financing requirements. It said that delaying Greece's debt repayments -- a move proposed by Germany to get private investors to take on some of the bailout burden and give the country more time to reform its spluttering economy -- would be considered a default.
The European Central Bank is against Germany's proposed debt extension, arguing that a default by a eurozone country could have devastating consequences on Europe's broader financial sector.
Finance ministers from the 17 euro nations will hold an emergency meeting on Greece's problems in Brussels later Tuesday.
Earlier this year, Greece secured an extension in the repayment timeline and a rate cut for its bailout funds, a deal which the finance ministry said Tuesday would save the country some euro800 million in interest every year.
Greece has been blocked out of long-term debt markets by exorbitant borrowing costs, with the interest demanded for 10-year bonds closely approaching 18 percent. However, the country has sought to maintain a market presence through treasury bill auctions, and on Tuesday managed to raise euro1.62 billion ($2.33 billion) in a 26-week issue.
Investors demanded a steep yield of 4.96 percent, compared with 4.88 percent in a similar debt sale last month. Demand was also lower, with the issue oversubscribed 2.58 times.
AP
