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Page last updated at 08:08 GMT, Tuesday, 21 June 2011 09:08 UK

Greek debt default 'now probable'

The Greek government is facing a parliamentary vote of confidence on its new cabinet this evening, to try to resolve the political crisis which has gone hand-in-hand with its economic woes.

Eurozone finance ministers have given the Greeks a fortnight to agree to cut spending, increase taxes and privatise services. If the measures are not passed, the eurozone has threatened to delay the release of 12bn euros in emergency loans to the country.

The BBC's business editor Robert Peston told the programme: "What the eurozone wants to avoid at all costs is a meltdown in Spain," if Greece defaults on its debts.

And Neil Mackinnon, chief economist at VTB Capital, said the future for Greece is far from clear, adding that it was "now probable" that the country would default.

"In the short term, obviously the EU and the International Monetary Fund are looking at ways to try and tide Greece over the next couple of months in terms of its funding," he told Today presenter Evan Davis.

"But the longer term issues, in terms of how Greece gets out of this debt problem, is very very difficult, and the scenario of Greece at some stage deciding that an exit from monetary union is much more preferable to a diet of economic contraction and fiscal austerity can't be ruled out."

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