Greece's conservatives vowed on Monday to reject any new austerity measures in return for the aid that is keeping Athens from bankruptcy, signalling a new coalition government may not enjoy the kind of cross-party support its lenders demand.
Ahead of a confidence debate in Greece's new cabinet, New Democracy party leader Antonis Samaras said he would not sign up for any new belt-tightening.
A policy mix of spending cuts and tax hikes agreed with Greece's international lenders should be changed to better promote growth, he said.
Although Samaras' party is part of the new administration led by former European Central Bank vice president Lucas Papademos, its support for the three-day old government has so far been lukewarm.
Another coalition party -- the small far right LAOS -- has also said it would not support any new wage or pension cuts.
I agree with the goals to cut government spending ... to reduce debt, to erase the deficit, to make structural changes. I do not agree with whatever stunts growth, he told party MPs ahead of a three-day confidence debate, starting on Monday.
His backing is crucial for passing legislation needed to satisfy the demands of Athens' bailout sponsors.
Crucially, he said he would not sign a pledge of support for conditions on a 130 billion euro (111 billion pound) bailout as EU Economic and Monetary Affairs Commissioner Olli Rehn has demanded.
I don't sign such statements, he said, adding that his word should be sufficient.
But Samaras's refusal to sign could imperil an 8 billion euro loan Greece needs by mid-December to avoid default.
The hardline stance suggests a continuation of wrangling between New Democracy and the fallen Prime Minister George Papandreou's Socialists that last week pushed Greece to the brink and prompted EU peers to consider Greece's exit from the euro.
In a sign of tension within the New Democracy, Samaras expelled moderate lawmaker Sotiris Hatzigakis from the parliamentary group after he insinuated there were far right elements in the party. His comment came after another deputy vowed to vote against the unity government.
DEMO DERAILS DELEGATION?
Papademos will unveil his new government's main policies later on Monday, before a confidence vote he is expected to easily win on Wednesday thanks to backing from New Democracy, the Socialists, and LAOS.
The government's task in parliament will be to come up with a plan to convince Greece's rescue lenders that it is worthy of the 130 billion euro bailout agreed by euro zone leaders last month and to set the stage for an election in early 2012.
Papademos must also convince its lenders Greece is willing and able to take further pain in return for the deal that would also wipe out 100 billion euros of private sector debt.
Inspectors from the EU, International Monetary Fund and the ECB, known as the troika, were due to meet the new administration after Wednesday's confidence ballot but uncertainty surfaced over whether they would actually come.
Tens of thousands of people angry at more than a year of austerity measures are expected to rally on Thursday, the anniversary of a 1973 student uprising that helped bring down a 1967-1974 military junta.
The march could be the biggest in months of protests and would complicate discussions with the troika by shutting down Athens, particularly as previous rallies have turned violent.
Greek public sector workers also vowed to walk off the job for three hours on Tuesday in protest against measures to cut jobs, salaries and pensions passed in October, while private sector union GSEE is considering nationwide strikes later in the month when the budget is to be voted on in parliament.
They may come at the end of the week but nothing is fixed, a spokesman for the European Commission's mission in Greece said of the troika team, which only last Friday had been slated to arrive early in this week.
Without a positive report from the inspectors, the rescue lenders may withhold aid -- most immediately an 8 billion euro tranche Athens needs by mid-December to avert bankruptcy.
MARKETS LOCKING UP
A similar scenario played out in Italy, where Silvio Berlusconi's technocrat replacement, former European Commissioner Mario Monti, worked to create a new administration and halt a collapse in market confidence in Rome.
But the appointments of both Papademos and Monti failed to quell fears of a possible Greek default or break up of the euro zone. Stocks and the euro slid in Europe trading and Wall Street also looked set to fall.
BlackRock, one of the world's largest asset managers, said debt restructuring in Greece, Portugal and Ireland should include losses of 75 percent to 80 percent for private bondholders -- above the 50 percent envisioned in Greece's rescue package -- to help stop a global meltdown.
Governments are falling, bond yields are zig-zagging by whole percentage points and markets around the world are locking up: the euro zone turmoil risks turning into a global crisis, it said in a research note on Monday.
Inspectors are responsible for assessing if Greece has hit agreed revenue and spending targets. If Athens slips -- as it has repeatedly in the past -- or the economy weakens, the troika would have to suggest further tough measures.
They will be heartened by news on Monday that the government raised 380 million euros in the sale of mobile phone frequencies -- a fraction of the 50 billion they pledged to raise in privatisations up to 2015, but a start.
The troika is also certain to cast an eye on budget data due out later on Monday that may show a further widening of Greece's central government deficit in the year to end-October.
Greece's jobless rate also jumped to a record 18.4 percent in August, despite it being the height of the tourist season when hotels and restaurants take on extra staff.
Papademos, sworn in on Friday to stabilise Greece's grossly indebted economy, will travel to Brussels on Thursday to meet European finance ministers.
The 64-year-old was asked to succeed Papandreou, whose proposal to hold a referendum on the bailout prompted EU leaders to raise the threat of a Greek exit from the currency bloc.
(Writing by Ben Harding and Michael Winfrey; editing by Richard Balmforth)