Four Greek ministers resign over planned spending cuts.

AFX News - Four ministers in the coalition government of Greek Prime Minister Prime Minister Lucas Papademos resigned Friday to protest against the austerity measures demanded by the troika of international creditors in return for a new EUR130 billion ($170bn) bailout loan.

Deputy Foreign Minister Mariliza Xenogiannakopoulou of the majority Socialist party was among the four ministers who resigned over the planned spending cuts. The remaining three, including transport minister and deputy ministers for merchant marine and agriculture, are from the the right-wing LAOS party.

The LAOS party is a junior member in the Papademos government. Although the party had agreed to the austerity measures a day earlier, its leader George Karatzaferis said Friday that all of party's 16 deputies would vote against the planned spending cuts when it comes for voting in the parliament.

The major coalition partners in the Greek government, which is backed by 252 lawmakers, are the socialist Pasok party and the conservative New Democracy party. The two parties together account for more than 230 deputies in the parliament. The planned austerity measures would be approved in the parliament if they are backed by the two major coalition partners, despite opposition from LAOS.

The ministers' resignations came amidst widespread protests as well as a 48-hour strike over the austerity proposals. Workers unions claim that such measures will impoverish the country's population further and drag it deeper into recession. There were several reports of clashes between protesters and riot police in Athens and several other Greek towns and cities on Friday.

A day earlier, eurozone finance ministers had deferred the approval of the new bailout package for Greece, saying that the debt-ridden euro member should ratify a new set of austerity measures for receiving the EUR130 billion ($172.52 billion) aid to finance its debts.

Euro-group chairman Jean-Claude Juncker said after the meeting that the Greek parliament must ratify the package on Sunday and urged it to find a further euro 325 million in savings to cover budget shortfall for 2012. He also demanded 'strong political assurances' from the leaders of the coalition parties on the implementation of the program, as Greece has repeatedly failed in the past to carry out planned reforms.

If the new bailout package gets ratified by the Greek Parliament on Sunday and approved by the eurozone finance ministers when they reconvene next Wednesday in Brussels, Athens would then be on track to receive sufficient funds for repaying a EUR14.5 billion bond due on March 20.

Hours ahead of the Brussels meeting on Thursday, leaders of the three major political parties in the Greek coalition government had reached a compromise deal on the adoption of the measures demanded in return for a new bailout. While making the announcement, Papademos said the troika of creditors, namely the EU, ECB and IMF, were satisfied with the deal.

Earlier negotiations between the Greek leaders had ended deadlocked over strong objections to some conditions of the bailout deal, particularly the creditors' demand to make euro 300 million ($397.87 million) cuts to state and private pensions. The deal was reportedly reached Thursday after Papademos assured Antonis Samaras, leader of the conservative New Democracy party, that pensions of low-income groups would left untouched.

The new bailout package offered by the troika of creditors demands a 22% reduction in minimum wages, 15% pension cuts and laying-off 15,000 civil servants by end of 2012. The deal, however, is said to have left holiday bonuses, known as 13th and 14th month salaries, untouched. The proposed measures are aimed at helping the Greek government save about euro 3.2 billion.

Greece, which has an estimated debt of euro 350 billion, is also engaged in talks with its private lenders for persuading them to accept bigger write-downs on their debt holdings. If the private creditors do agree to a bond swap deal that would cost them almost half their holdings, Greece would reduce its debts by about 100-billion-euros.

Greece has already availed a joint EU-IMF 110-billion-euro rescue loan in May 2010, of which about 73 billion euros have been handed out to Athens in a series of tranches. Nevertheless, EU leaders agreed at a summit held in October to provide Greece with a new 130-billion-euro rescue package.

The Greek government has been under immense pressure from the other eurozone members to accept the conditions of the new bailout package to avoid defaulting on its debts as well as a possible exit from the single currency bloc.