Greece's national unity government will submit a 2012 austerity budget to parliament on Friday, its first task in meeting the terms of an international bailout to avoid bankruptcy, but a rift widened between the coalition's main parties.
Technocrat Prime Minister Lucas Papademos must obtain the endorsement of the rival parties that they will do what it takes to meet the terms of the aid deal and persuade Greece's lenders to release emergency funds it needs to avoid default in mid-December, plus more longer-term financing later.
As part of that process, inspectors from the troika of the International Monetary Fund, the European Union and the European Central Bank will start arriving in Athens on Friday for talks on next month's 8 billion euro loan tranche.
But tensions have risen between coalition partners, the Socialists of fallen prime minister George Papandreou and the conservative New Democracy, as the latter has given only tepid support for reforms and has begun jockeying for position ahead of a snap election tentatively slated for February 19.
New Democracy leader Antonis Samaras has refused to sign a commitment to do whatever is needed to meet the terms of the 130 billion euro bailout agreed last month, defying a crucial demand by the EU and IMF for Athens' next aid tranche.
He said on Thursday he needed to win a parliamentary majority in the February 19 vote to reverse the austerity measures he disagrees with, angering the Socialists.
As far as this government is concerned, Mr Samaras is saying whatever suits him, Deputy Justice Minister George Petalotis, a senior Socialist (PASOK) party member, told state NET TV. All he has to say is that this is a transitional government, not a coalition government.
Samaras has said he will back all austerity measures already passed but no new ones. He is publicly committed to unity government but, with elections down the road, has effectively tried to distance himself while still being seen to be taking part for the sake of keeping Greece's creditors on side.
The PASOK-New Democracy dispute has eroded support for the two main parties, which are also joined in the new government by the far-right LAOS party.
But a poll showed 68 percent of voters like Papademos, who took power after an attempt by Papandreou to call a referendum on reforms stunned euro zone leaders, raised doubts over Greece's future in the euro currency and led to his resignation.
The ALCO pollster survey showed support for New Democracy had slipped to 21.2 percent, from 22.5 percent before the creation of the unity government.
The Socialists fell to 11.8 percent, from 15. The data included voters who were undecided, would abstain or cast blank or invalid ballots, who together totalled 28.9 percent.
The only certainty is the positive rating of the new prime minister, ALCO said in a commentary. It's obvious that Greek society is facing the composition of the new government with great distrust and is waiting to see how it will act.
The reforms have angered many ordinary Greeks. On Thursday at least 50,000 took to Athens' streets on the anniversary of a 1973 student uprising against the then-ruling military junta.
Chanting EU, IMF out!, they protested against belt-tightening steps that have already slashed wages and caused huge job losses, driving unemployment to a record 18 percent.
The European Commission expects Greece's 220 billion euro economy to shrink 2.8 percent in 2012, a fifth year of contraction that is seen bottoming out at a size some 15 percent smaller than it was before the crisis.
The cabinet is expected to approve the budget on Friday and then send it to parliament, where it will proceed through committees for a vote by the whole chamber, which may not come until next week or later.
Its main aim is a primary budget surplus -- with revenues exceeding spending when debt maintenance costs are excluded -- next year so Greece can start digging itself out from under a debt load that exceeds 30,000 euros for every Greek, or more than one and a half times the average annual income.
To do that, Papademos's government must tackle rampant tax evasion, start selling off billions of euros worth of inefficient public companies and lay off public workers - all reforms planned but never executed by Papandreou.
In another key part of the bailout plan, Greece has begun talks with private sector bondholders on a bond swap which aims to halve the debt Greece owes to them.
If the swap deal is successful, state radio said, the budget deficit would fall to 5.4 percent of gross domestic product in 2012. Without the debt swap, the deficit would be 7 percent, the radio said, without citing a source. Both figures would be smaller than the 9 percent the government expects this year.
The Finance Ministry said it should have a proposal ready by the end of the month, but the Institute of International Finance, negotiating on behalf of the banks, said it may take longer to conclude. The end of November is an optimistic timetable. We want to move as promptly as possible, said IIF Managing Director Charles Dallara.
(Editing by Mark Heinrich)