Lucas Papademos
Greek Prime Minister Lucas Papademos addresses the nation during a televised speech in Athens February 11, 2012 Reuters

Greek lawmakers looked set to agree to a deeply unpopular bailout deal on Sunday to avert what Prime Minister Lucas Papademos warned would be economic chaos, and Germany demanded Athens dramatically change its ways to stay in the euro.

Greek Prime Minister Lucas Papademos addresses the nation during a televised speech in Athens February 11, 2012

The austerity bill sets out 3.3 billion euros in wage, pension and job cuts as the price of a 130-billion-euro rescue package from the European Union and International Monetary Fund - Greece's second since 2010.

Greece needs the funds before March 20 to meet debt repayments of 14.5 billion euros and the bill has stirred anger on the streets and turmoil within the coalition government.

Addressing the nation late on Saturday, Papademos warned that failure to back the bill would mean a disorderly default and set the country on a disastrous adventure.

It would create conditions of uncontrolled economic chaos and social explosion, he said. The country would be drawn into a vortex of recession, instability, unemployment and protracted misery and this would sooner or later lead the country out of the euro, he added.

Greece's Communist Party accused him of lying and scaremongering.

But euro zone paymaster Germany ratcheted up the pressure, saying Europe needed action, not words.

The promises from Greece aren't enough for us any more, German Finance Minister Wolfgang Schaeuble said in an interview published on Sunday in Welt am Sonntag newspaper.

German opinion polls show a majority of Germans are willing to help, Schaeuble said, but it's important to say that it cannot be a bottomless pit.

That's why the Greeks have to finally close that pit. And then we can put something in there. At least people are now starting to realise it won't work with a bottomless pit.

Greece needs to do its own homework to become competitive - whether that happens in conjunction with a new rescue programme or by another route that we actually don't want to take...

When asked if that other route meant Greece would have to leave the euro zone, Schaeuble said: That is all in the hands of the Greeks themselves. But even in the event (Greece leaves the euro zone), which almost no one assumes will happen, they will still remain part of Europe.


He said that the rescue efforts for Greece were proving more difficult than efforts to unify Germany in 1990.

The reason is the realisation that there is a need for change, and change dramatically, still needs to develop further with a lot of people in Greece.

The 300-seat parliament is due to begin debating the bill at 2 p.m. (1200 GMT) before a vote expected late in the evening.

Demonstrators have pledged to turn out in force at 6 p.m. (1600 GMT) on the main square in front of the assembly, although rainy weather may limit the numbers of protesters.

The austerity measures include 300 million euros in pension cuts and a 22 percent reduction in the minimum wage from about 750 euros a month.

The bill aims to cut Greece's bloated state sector workforce by about 150,000 people by 2015.

It also provides for a bond swap to ease Greece's debt burden by cutting the real value of private investors' bond holdings by some 70 percent.

On a day of dire warnings and stormy debate on Saturday, leaders of the ruling coalition told uneasy lawmakers to support the bill or be dropped from party lists for an election that could come by April.

At least 20 deputies from the two main parties in the Papademos coalition threatened on Saturday to vote 'No' - but the bulk of the coalition's 236 MPs are still all but certain to approve the package. Six members of his cabinet have resigned.

Finance Minister Evangelos Venizelos said the deal had to be approved by Sunday or the country would miss a February 17 deadline to offer the debt haircut to its private-sector bondholders.

Euro zone finance ministers also expect Greece to explain by then how 325 million euros from this year's total budget cuts, as yet unspecified, will be achieved before it agrees to the bailout.

Bailout documents released on Friday left blank the amount of the full rescue package, and Venizelos said Greece might need 15 billion euros more to save the country's banks, confirming estimates from EU officials.

The EU and IMF say they will not release the aid without clear commitments by the main party leaders that reforms will be implemented, whoever wins the next election.