- Berlusconi faces crunch vote, pressure to quit
- Ex-central banker front-runner to become Greek PM
- Socialist tries to gain points in Spanish election debate
ROME (Reuters) - Italian Prime Minister Silvio Berlusconi, under massive pressure to resign, faces a crucial vote on public finances in parliament on Tuesday which could sink his government if enough party rebels desert him.
Berlusconi has denied reports that his resignation is imminent as he struggles to hold his centre-right coalition together, but the increased political uncertainty in Italy has added to turmoil in Europe, hitting global markets on Monday.
Chances of defeat in the vote seem to be receding because the centre-left opposition may abstain to highlight Berlusconi's lack of support, without hindering the essential ratification of 2010's public accounts.
However, the opposition is preparing a subsequent no-confidence motion that could be held within days.
Yields on Italy's 10-year bonds touched their highest since 1997 at 6.67 percent on Monday, a level seen as unsustainable for Italy's massive debt and which could spiral out of control.
Italy has the third biggest economy in the euro zone and its debt worries are a huge threat in the wider crisis facing the continent's single currency.
Berlusconi's failure to adopt reforms swiftly to defuse the debt crisis has fuelled dissent within his party, though estimates vary widely over how many centre-right deputies will jump ship in the key vote in the lower house due at 1430 GMT.
The 75-year-old prime minister spent the weekend trying to win back the support of enough deputies to avoid humiliating defeat in the vote, which he has already lost once.
If he is defeated again, Berlusconi could either resign immediately or be ordered by President Giorgio Napolitano to call a confidence vote.
Berlusconi reiterated his determination to continue at the helm of the government on Monday even though several people close to him, including Interior Minister Roberto Maroni, have said they believe he no longer has a majority.
"We will carry on, we have to be ready to fight because a new unelected government including the left would be the opposite of democracy," Berlusconi posted on his Facebook page on Monday evening.
European equity markets pared losses on Monday following talk that the prime minister was close to resigning, indicating how much markets would welcome his departure.
Italy's government bond prices would recover and the yield spreads would narrow by a full percentage point if the government fell, according to a Reuters survey of 10 fund managers last week.
But even if he goes, there is uncertainty about how Italy can tackle its crisis. Berlusconi and his Northern League allies have insisted the only alternative to him is an election early next year, likely to push back reforms even further.
The possibility of a national unity or technocrat government, preferred by markets, is opposed by Berlusconi and League leaders whose parliamentary support may be needed for it to function.
(Editing by Andrew Roche)
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ATHENS (Reuters) - A former deputy head of the European Central Bank emerged on Monday as frontrunner to become Greek prime minister, as party leaders bargained over who will lead a "100-day coalition" to push through a bailout before the nation runs out of money.
Under EU pressure, an unaccustomed spirit of compromise seeped into Greek politics as the top parties haggled over the jobs in a government which will run Greece only until early elections in February.
A source at the opposition conservatives said they accepted socialist Finance Minister Evangelos Venizelos could stay in his job at a time of national crisis, but said nothing had been agreed yet on who should lead the unity government.
European Union leaders want Greece to form the coalition quickly and push the 130 billion-euro bailout through parliament, for the sake of a nearly bankrupt nation and to shore up confidence in the euro zone.
In Brussels, EU leaders kept up the pressure, saying Greece could get a delayed instalment of emergency funding this month from the EU and IMF -- but only if the coalition gave a written commitment to the new bailout package.
"It is essential that the entire political class is now restoring the confidence that had been lost in the Greek commitment to the EU/IMF programme," said EU Economic and Monetary Affairs Commissioner Olli Rehn.
Greece needs the 8 billion-euro instalment, part of an original rescue package pulled together last year, to meet heavy debt repayments next month and avoid defaulting. However, lenders have held back due to a series of disputes with Athens.
Even the United States weighed in, with the White House urging Greece to move as quickly as possible to fulfil its commitments under the rescue package, as speculators pounded euro zone bond markets.
STILL NO NAME
By late evening the socialist PASOK party and conservative New Democracy had still not named a new prime minister, and the opposition source refused to comment on speculation that former ECB vice president Lucas Papademos would get the job.
Talks continued and the cabinet of outgoing Prime Minister George Papandreou was due to meet at 1000 GMT on Tuesday.
However, the source told Reuters that New Democracy was willing to let Venizelos stay. "The economic ministries, including finance minister Venizelos and his team, should stay for the sake of continuity," said the source, giving the first indication of who would occupy any of the cabinet posts.
New Democracy would back the 2012 budget and a bond swap plan contained in the bailout package, under which the value of banks' holdings of Greek government debt will be halved.
While the party would support the coalition, it wanted no cabinet seats itself, the source said. However, the socialists had to hand certain major ministries such as justice, defence and the interior over to non-party technocrats, he said.
Whoever leads the transitional government of national unity will have a monumental task in restoring order to a country whose chaotic economy and politics are shaking international faith in the entire euro project.
Despite the sealed lips on both sides, Papademos remained a possible frontrunner for premier. An aide said the Greek economist, who left the ECB last year, had arrived in Athens on Monday from the United States where he is a Harvard academic.
Outgoing Prime Minister George Papandreou has been in touch with Papademos, a senior government official told reporters. "The prime minister had several telephone contacts with Mr Papademos in the last days," the official said.
Papademos oversaw the nation's adoption of the euro in 2002 as Bank of Greece governor before moving to the ECB, and is a well-known figure in European capitals.
Another possible candidate emerged on Monday. European Ombudsman Nikiforos Diamandouros, who handles complaints against EU institutions, said he had been approached to become a possible candidate to lead the coalition and might be ready to "contribute" under certain conditions.
Greek media also raised a third possible candidate, the country's envoy to the IMF, Panagiotis Roumeliotis, a former socialist economy minister.
A PROBLEMATIC CABINET
Greeks worry that any new premier will struggle merely to get Papandreou's socialist PASOK party and New Democracy to work together. "I'm afraid the new government will very soon turn out to be problematic," conservative former finance minister Stefanos Manos told Reuters.
"The new prime minister will ... not give the impression that he is in charge. Everyone will be looking to the two party leaders who will be running things behind the scenes," he said, adding: "The civil service won't implement any decision and everyone will be waiting for the election."
At least the two parties agreed on the likely lifespan of the coalition, deciding in the early hours of Monday morning that Feb. 19 would be the preferred date for an election.
Papandreou, who sealed his fate last week with a shortlived attempt to call a referendum on the bailout, will stand down when the new government takes over, under a deal sealed with New Democracy leader Antonis Samaras on Sunday.
Greeks have suffered immensely in the two years that Papandreou has run the country. International lenders have demanded wave after wave of pay and pension cuts, plus tax increases and job losses in return for emergency aid. This has helped to keep Greece in four successive years of recession.
The Communist PAME labour group will hold a rally in Athens on Nov. 10 to oppose a new government which it said "has the task to save the monopolies and crush the popular movement".
"They want to vote through the new bailout... which will leave Greek people with their hands tied for many years."
Greek bank shares, the country's best benchmark of market sentiment with the government shut out of bond markets, rose 3 percent on the coalition deal.
A new coalition would be sworn in and hold a confidence vote within a week if all goes to plan, the government says.
Many Greeks remained sceptical about a coalition tasked with imposing more austerity to tackle a huge budget deficit.
"Hurrah, we are saved!" said plumber George Vihos sarcastically. "Why should we celebrate now that they will make sure we bear the pain?"
Papandreou had sought the referendum to show that harsh cuts demanded in the bailout had public support, but the risk that a "no" vote could bring about a sudden bankruptcy caused mayhem in markets, anger in Europe and rebellion in the ruling party.
He soon ditched the idea and won a confidence vote in parliament, but only after promising to make way for the national unity coalition.
(Additional reporting by Harry Papachristou and George Georgiopoulos, Reuters Brusssels bureau; Writing by David Stamp; Editing by Andrew Roche)
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REUTERS - Spain's Socialist candidate for prime minister, lagging badly in polls, tried to paint his conservative rival as a threat to the welfare state in a televised debate on Monday that was not expected to save the Socialists from a Nov. 20 election rout.
Spain's sky-high unemployment rate and the euro zone crisis dominated the only scheduled debate between centre-right People's Party leader Mariano Rajoy, expected to win the election by a wide margin, and Socialist Alfredo Perez Rubalcaba.
The PP's lead is so large, 17 percentage points according to two polls, that Rubalcaba's only hope in the debate was to generate fear over Rajoy's economic plans to try to keep him from getting a likely absolute majority in Parliament.
"If you tell people the plans you have in your head, not even your own party members will vote for you," said Rubalcaba, attacking Rajoy for not giving voters enough detail on plans to drastically cut spending.
Rajoy is widely expected to implement deep austerity measures if he wins the election, to cut Spain's public deficit as the euro zone crisis threatens to drag the country into needing a financial rescue like Greece, Portugal and Ireland.
In the debate Rajoy pledged not to freeze pensions but Rubalcaba failed to draw him on where he would make cuts.
LITTLE IMPACT SEEN
"The impact of the debate is going to be rather low... We didn't see much new," said Ismael Crespo, head of the department of political communications at the Ortega Maranon Foundation.
"Rubalcaba tried to put in doubt the PP programme... to show it was a hidden programme... while Rajoy tried to show that Rubalcaba is part of the administration that has put Spain in the crisis."
Rubalcaba, who stepped down as interior minister to lead the Socialists in the campaign, said if he won the election he would be cautious about spending cuts and find ways to stimulate the stagnant economy by taxing the rich.
"Why didn't you do it earlier... your tax on the rich?" countered Rajoy, also a former interior minister.
Rubalcaba has struggled to differentiate himself from unpopular Socialist Prime Minister Jose Luis Rodriguez Zapatero, after working in his government for seven years.
"There are five million Spaniards who want to work and can't," Rajoy repeated several times in the debate, attacking the Socialists for mishandling the economic crisis.
One in five workers in Spain is jobless, the highest unemployment rate in the European Union.
The face-to-face did not include candidates from smaller parties, such as United Left, and the format, without questions from moderator Manuel Campo Vidal, a well-known journalist, left little room for surprises.
Rajoy, who lost two previous general elections against Zapatero, is generally considered an uncharismatic politician and his restrained campaign has benefited from the Socialists' mistakes.
However, snap polls after the debate showed him as the debate winner. In a Metroscopia poll for left-leaning newspaper El Pais 46 percent said they saw Rajoy as the winner while 41 percent thought Rubalcaba had won.
In interviews for state television, the editors of Spain's large newspapers said they thought Rajoy had won the face-off.
Nevertheless, some commentators criticised Rajoy for reading from his notes during the debate in which each of the two candidates were given blocks of time to speak and answer each other.
"A politician should be able to speak for three minutes without looking at his papers," said Julian Santamaria, professor in political sciences at the Complutense University in Madrid.
Rubalcaba repeatedly asked Rajoy to clarify aspects of the PP manifesto, including whether he would drop his opposition to Spain's gay marriage law.
(Additional reporting by Iciar Reinlein; Editing by Fiona Ortiz)
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