By Daniel Flynn and Harry Papachristou
ATHENS (Reuters) - Greece's deputy prime minister warned that rebel lawmakers may yet block some reforms sought by international lenders, though parliament is expected to back an overall austerity package this week to avert national bankruptcy.
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Adding to Socialist Prime Minister George Papandreou's dire problems, the conservative opposition rejected on Sunday appeals from the government and senior European Union politicians to vote in favor of the five-year plan.
Parliament is due to start debating the program of tax increases and spending cuts worth 28 billion euros on Monday. Papandreou needs parliamentary approval this week to secure the next payment under a 110-billion euro ($156.1 billion) EU/IMF bailout.
In an interview published on Sunday, Deputy Prime Minister Theodore Pangalos was optimistic about overcoming discontent in his PASOK party to win a first round of general votes on tax and spending targets plus the creation of a privatization agency.
But he was more cautious about whether the government could push through further enabling legislation on individual budget measures and privatization of specific state assets.
"I think the package of short and medium-term measures with which we basically hope to establish the framework to undertake reforms will be approved without difficulty," Pangalos told Spanish newspaper El Mundo in an interview published on Sunday.
However, he said approval of specific laws to enact fiscal reforms and privatizations may be more difficult to achieve.
"That's where we may have problems. I don't know whether some of our legislators will vote against it. It's possible."
Without its next 12-billion euro tranche of funding from the IMF and European Union, Greece faces the prospect next month of becoming the first euro zone country to default, sending shockwaves through a fragile global financial system.
But many Greeks who have lost jobs or seen their real income decline by nearly one-fifth over the last two years have reacted angrily to measures they say fail to target wealthy tax evaders whom they regard as responsible for Greece's plight.
Papandreou's PASOK party has seen its slender majority whittled down by five defections over the last 13 months, leaving it with 155 seats in the 300-member parliament.
Two of its legislators have already announced they will not support the deal in the coming week, and a third reiterated on Sunday he would do so only if new Finance Minister Evangelos Venizelos gave him assurances.
"I have submitted a 16-point paper to Venizelos... and I expect specific answers, on which (my stance) will depend," lawmaker Panagiotis Kouroublis told state radio NET on Sunday.
With Greece unable to return to international bond markets next year, as foreseen under its EU/IMF program, European leaders are working on a new bailout of a similar size, including a contribution from private sector banks which would agree to a "voluntary" rollover of their holdings of Greek debt.
Euro group president Jean-Claude Juncker, the prime minister of Luxembourg, said on Sunday that the size of this private sector contribution would be discussed at a euro zone finance ministers' meeting in early July.
Ramping up pressure on the government, unions have called a two-day national strike from Tuesday. Many companies, including the main electricity group PPC which is slated for partial privatization next year, have started rolling stoppages.
But New Democracy leader Antonis Samaras turned a deaf ear to the appeals from home and abroad to support the package, saying the painful measures would only deepen Greece's worst recession in 37 years.
"You can't ask for more taxes in an already overtaxed country, in a market that has been sucked dry, with economic activity at zero and a huge recession," he said in a statement.
Greek ministers and policymakers had urged legislators to approve the austerity package, adding to calls from European leaders to avoid a crisis in the 17-member euro zone.
German Finance Minister Wolfgang Schaeuble urged the Greek parliament to approve the measures, warning that the EU would not relax this condition for disbursing the next aid tranche.
"The stability of the entire euro zone would be in danger and we would need to quickly ensure that the risk of contagion for the financial system and other euro area countries would be contained," he told German Sunday newspaper Bild am Sonntag.
Venizelos, a Socialist party baron given the finance portfolio in the cabinet reshuffle, clinched the agreement of EU and IMF inspectors on Thursday to a raft of measures which he hopes can put government finances back on an even keel after it failed to meet targets under its international program.
The steps include a one-off solidarity levy on income, a rise in heating fuel tax and the introduction of income tax even for low earners on wages of 8,000 to 12,000 euros a year.
A peaceful crowd of around 1,000 people gathered on Sunday in Syntagma square outside parliament, which was protected by a line of riot police.
With youth unemployment running at around 40 percent, many of those who have taken to the streets in protest or camped in Syntagma over the last month are young people who fear the measures will worsen their dim economic prospects.
"The choice is not between voting for the measures or defaulting, but between economic and social bankruptcy on the one hand and growth and social cohesion on the other," said the Left Coalition, a small opposition party, in a statement.
(Additional reporting by Tracy Rucinski in Madrid; editing by Ralph Boulton)