Greek premier vows to fight for austerity package amid quit calls

The ruling Socialist Party deputies are to hold an emergency meeting to discuss the crisis that has shaken global markets.

To a standing ovation in the Greek parliament, Mr Papandreou said he would reshuffle his cabinet before putting it to a vote of confidence.

“I seek and will continue seeking wider consensus,” said Mr Papandreou. “Our response to the challenges we face is stability and to stay on our course of reforms.”

Mr Papandreou faces an escalating revolt within his own party as he manoeuvres to pass new austerity measures.

Two prominent Socialist lawmakers resigned their seats in parliament hours before Mr Papandreou was to announce the reshuffle.

The news broke out a day after anti-austerity riots in central Athens and an embarrassing collapse of negotiations to form a coalition government with opposition parties.

Mr Papandreou is struggling to contain party dissent over a new five-year austerity package that creditors have demanded in return for continued funding from a 110 billion euro (£96bn) international bailout.

Without the rescue loans, Greece will default on its massive debts, which would have widespread ramifications for the global economy as well as the 17-nation eurozone.

The resignations of two lawmakers do not affect the government’s five-seat majority in the 300-member parliament, as their seats will now go to other Socialists, but it was a clear sign of deepening dissent.

Former public order minister Giorgos Floridis, who fiercely criticised the slow pace of reforms in Greece, had been tipped to join the new government but instead joined the growing ranks of sceptics. In his resignation letter he blasted both the Socialists and opposition parties for their brinkmanship tactics.

“Unfortunately, the leaderships of the two main political parties have once again failed to rise to national circumstances, in a politically unforgivable way,” Floridis wrote.

EU officials have been pressing for cross-party unity on the new austerity package, which will impose more tax rises and spending cuts, and runs two years beyond the current government’s term to 2015. The bill must be passed in Parliament by the end of this month.

Conservative opposition leader Antonis Samaras has insisted the initial agreement for Greece’s bailout must be renegotiated.