By Costas Pitas and Lefteris Karagiannopoulos
ATHENS (Reuters) - Prime Minister Alexis Tsipras battled to win lawmakers' approval on Wednesday for a bailout deal to keep Greece in the euro, while the country's creditors, pressed by the IMF to provide massive debt relief, struggled to agree a financial lifeline.
Having reluctantly conceded to negotiating a third bailout from international lenders on stringent terms, Tsipras must face down a rebellion in his anti-austerity Syriza party to push sweeping pro-market reforms and spending cuts through parliament.
"It's a difficult deal, a deal for which only time will show if it is economically viable," his finance minister, Euclid Tsakalotos, told lawmakers during a debate on reforms.
Dozens of MPs, including senior Syriza figures and the government's junior coalition partner, may partially or fully reject the bailout, forcing Tsipras to rely on pro-European opposition lawmakers to carry the vote, which is expected after midnight.
A snap election could follow if the prime minister's majority collapses, and in an early sign of trouble in store, the deputy finance minister abruptly submitted her resignation and the energy minister said he would not back the deal.
"The choice between a bailout or catastrophe is a choice made in the face of terror," Panagiotis Lafazanis, who heads the far-left flank of Syriza, told reporters.
Adding to the uncertainty, a confidential study by the International Monetary Fund, seen by Reuters, called for much more debt relief than European countries, particularly Germany, have been prepared to countenance so far.
Berlin, which along with the other creditors knew about the IMF study before agreeing to new bailout talks, may wince at providing huge debt relief to a country it scarcely trusts to honor its promises.
But Germany insists on having the IMF in the negotiations to help keep Greece in line, and may countenance extending maturities for Greek debt provided there was no writedown.
"Technically, this possibility exists," said finance ministry spokesman Martin Jaeger when asked about the option of extending the maturities of Greek debt to 30 years or so.
"That is certainly an element that one can consider, but it will not be the solution if it leads to a significant reduction in the cash value (of the debt) as then we would in the end have nothing other than a debt haircut via the backdoor," he said.
"EUROPE'S BANKRUPT CHILD"
The European Commission published its own assessment of Greece's debt burden on Wednesday that also offered the prospect of debt relief. While also ruling out any write-offs, the Commission said debt reprofiling was possible, as long as Greece implemented the reforms it has committed to.
In addition, Brussels has proposed 7 billion euros in bridge financing to keep Greece afloat in July, when it must repay crucial loans to the European Central Bank. The plan could prove controversial as it would use the European Financial Stability Mechanism (EFSM), an EU-wide fund, roping in countries like Britain who balk at their taxpayers contributing to a rescue.
Fighting his own battle with Brussels to reform the EU, British Prime Minister David Cameron joined calls to give Greece debt relief but ruled out contributing to the bailout.
Washington has stepped up pressure for a deal between the euro zone and NATO member Greece. U.S. Treasury Secretary Jack Lew is making a short-notice trip to Frankfurt, Berlin and Paris this week to press for a quick agreement.
Pointing to Washington's importance in the talks, Deputy Prime Minister Yannis Dragasakis said the deal Tsipras struck with creditors might never have happened without U.S. pressure.
European stocks rose and bond yields fell, with investors betting parliament would back the bailout.
Although the bailout package is much tougher than the Greek people could have imagined when they resoundingly rejected a previous offer from the creditors in a referendum on July 5, most want to keep the euro.
"We are Europe's bankrupt child and as a child, Europe has been supporting us for five years and told us what we needed to do to get out of this situation," Yannis Theodosia, a 35-year-old civil engineer. "We did nothing and now we are paying the consequences."
With banks shut and the threat of a calamitous exit from the currency bloc hovering over the country if it cannot conclude a deal, many Greeks see the package as the lesser of two evils.
"Whoever says that outside of a deal, and outside of the euro, austerity would automatically end, is telling lies," State Minister Nikos Pappas said on entering parliament.
VOTING NO
Tsipras has described the deal as a "one-way street" imposed on Greece and the rest of his government shared his scepticism.
He will put the bailout package to parliament while grappling with noisy opposition from within his own ranks. Protests on the streets have so far been relatively muted although civil servants and pharmacists -- who are a target in the reforms package -- held a strike on Wednesday and leftwing anti-bailout groups staged protest marches.
The latest deal was a major capitulation from Syriza, which stormed to power promising an end to austerity. The fiery parliamentary speaker and the party's parliamentary spokesman both announced they would vote against reforms. Such outbursts had one right-wing newspaper crowing over the "civil war" engulfing the party.
Syriza's junior coalition partner said it would vote only for certain clauses in the bill, rejecting those reforms that went beyond a previous vote in parliament that had given Tsipras a mandate to negotiate in Brussels.
In recent weeks, negotiations between Athens and its creditors became increasingly fractious, with each side accusing the other of blackmail. Greece painted European countries, particularly Germany, as bullies, while the creditors said their trust in the Greek negotiators had all but evaporated.
"We have improved. In the beginning we thought that by sending a minister and a few consultants we were negotiating, that was very insufficient," Deputy Prime Minister Dragasakis said in an interview with Sto Kokkino radio.
"The crisis was ours, the crisis existed before the bailout memorandum, it was a crisis of the Greek capitalist system. The memorandums were the medicine to this crisis that proved to be worse than the illness it was supposed to cure."
(Additional reporting by Georgia Kalovyrna, George Georgiopoulos, Ingrid Melander, Angeliki Koutantou in ATHENS, Alastair Macdonald and Jan Strupczewski in BRUSSELS, Madeline Chambers and Caroline Copley in BERLIN, Mark John and Yann Le Guernigou in PARIS, William James in LONDON; writing by Matthias Williams; editing by Philippa Fletcher)
