THIS EVENING WILL see a vote of confidence in the Greek government which, if won, will pave the way for the passing of €28 billion in austerity measures.

Those measures are crucial if Greece is to receive the next installment – €12 billion – of its EU/IMF bailout. A meeting of eurozone finance ministers failed to reach an agreement on that next installment until after the parliamentary vote.

If the Greek parliament approves the austerity measures then eurozone ministers will gather again in July to approve the next tranche of the bailout. Without the €12 billion Greece will be forced to default, which will rock financial markets. European officials fear a default could set off a chain reaction that would shake Europe’s banking system and economy, and drag down other financially troubled eurozone countries.

The measures have already sparked violent protests on the streets in Greece and forced the Greek prime minister George Papandreou to reshuffle his cabinet.

Papandreou says the country is at a critical juncture, and that a default on Greece’s massive debt would be a “catastrophe”.

It has already been conceded that Greece will probably need a second bailout roughly the same size as last year’s €110 loan.

The IMF has warned that if the crisis in Greece is not dealt with quickly, contagion will spread to Ireland and Portugal, and possibly to Spain, Italy and Belgium reports the New York Times. The head of the eurozone finance ministers’ group Jean Claude Juncker has warned that Ireland will be seriously affected if Greece defaults.

The Telegraph reports that British Prime Minister David Cameron has said that he doesn’t think the UK should contribute to the next installment of Greece’s bailout, and said that he will be delivering that message to a meeting of the European Council this week.

Meanwhile Greece was hit by power cuts yesterday as employees at the main power utility began 48-hour rolling strikes to protest the company’s privatisation. The sell-off of state assets in the power company is a major step in a €50 billion privatisation drive that must be completed by 2015.

- Additional reporting by AP

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