Prime Minister George Papandreou, besieged by public protests and dissent in his own party, appealed to Greeks on Sunday to support deeply unpopular austerity reforms and avoid a catastrophic bankruptcy.
Papandreou addressed parliament at the start of a confidence debate in his new crisis cabinet, ahead of a euro zone finance ministers' meeting in Luxembourg which is expected to release a new aid tranche to keep Greece going.
Papandreou, his own political survival on the line, said Greece was at a critical crossroads and its cash reserves would soon be exhausted without the 12 billion-euro tranche from the European Union and IMF.
The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks, and the country's credibility, he told parliament.
Papandreou overhauled his government to staunch dissent in the ruling party after the departure of three deputies and public protests threatened a five-year package of new tax hikes, privatizations and spending cuts agreed with Athens' international lenders.
New Finance Minister Evangelos Venizelos headed to Luxembourg for a meeting late on Sunday of euro zone ministers.
The European Union and International Monetary Fund have demanded the plan in exchange for a fresh bailout worth some 120 billion euros ($172 billion) that Greece, effectively shut out of debt markets, will need to pay its bills up to 2014.
Main opposition leader Antonis Samaras called for Papandreou to step down to pave the way for elections and renegotiation of the bailout. Why is the government insisting on us supporting the mistake? It does not want consensus but complicity.
But Papandreou called for the opposition to stop fighting in these critical times, stop sending the image that the country is being torn apart.
APPEAL FOR UNITY
Showing that we are split is not helping us at all, he said.
The cabinet hopes to push the reforms through by end-June, but weeks of anti-austerity rallies on the steps of parliament have created political uncertainty and spooked investors who fear public rage may weaken the government's resolve.
Protesters have vowed to step up demonstrations, which erupted in violence last Wednesday, and unions plan new strikes to dissuade lawmakers from passing the plan.
Workers at Greek state utility PPC said they would launch a 48-hour strike at midnight, which may result in rolling power outages, to oppose government plans to sell the company.
In an attempt to mitigate the unpopularity of the reforms, Papandreou promised to correct injustices and ensure the poor would not be the worst affected by tax hikes.
German Finance Minister Wolfgang Schaeuble intends to propose a compromise to the European Central Bank to permit private sector involvement in the new Greek bailout, German magazine Der Spiegel said on Sunday.
This might remove a major obstacle to private sector rollover of Greek debt, which the ECB has so far opposed.
There has been a chorus of calls from inside and outside Greece for an end to political infighting and a greater resolve to tackle the crisis.
The reshuffle has given the prime minister a little bit of calm in the party and only a bit of political time to complete what wasn't done over the past 20 months, commentator Vassilis Triandafyllou wrote for weekly Real News.
Finally they have to decide to govern, to dare to change everything that led us to the brink.
An opinion poll taken before the reshuffle showed 47.5 percent of respondents wanted parliament to reject the reform package and for Greece to hold an early election rather than allow Papandreou to finish his term, which ends in 2013.
Just over a third -- 34.8 percent -- wanted the package approved so Athens could secure the second bailout, according to the poll in daily To Vima's Sunday edition.
Greece's international lenders asked for the five-year, 28 billion-euro austerity campaign after the Socialist government failed to meet the fiscal targets laid out in its original, year-old bailout.
Along with a call to sell off state firms to raise 50 billion euros by 2015, the plan envisions 6.5 billion euros in budget consolidation for 2011, almost doubling existing belt-tightening measures that have already driven unemployment to a record high and extended a recession into its third year.
Some analysts say that while Papandreou may have soothed internal party dissent, his new cabinet could try to soften the implementation of reforms. The new ministers include former outspoken opponents of the austerity plan.
Finance Minister Venizelos has suggested he will ask his euro zone counterparts to approve some changes to the plan, aimed at social justice, when he travels to Luxembourg on Sunday.
Venizelos has given no details, but his predecessor pledged earlier in the week to refrain from hiking heating oil tax and to raise the tax-free threshold on property.
(Additional reporting by George Georgiopoulos and Michael Winfrey; editing by Andrew Roche)