ATHENS (Reuters) ? Greek Prime Minister George Papandreou canceled a planned visit to the United States on Saturday to deal with a deepening crisis at home, days before European Union and IMF inspectors decide on further funding for the debt-ridden country.
Finance Minister Evangelos Venizelos rushed to allay fears the canceled trip signaled imminent default, saying such talk was "ridiculous," but the conservative opposition seized the opportunity to demand snap elections, fanning fears Greece lacks the will needed for tough measures ahead.
"The comments and analyses about an imminent default or bankruptcy are not only irresponsible but also ridiculous," Venizelos said in a statement.
"Every weekend Greece ... is subject to this organised attack by speculators in international markets."
Papandreou was in London, en-route to United Nations and International Monetary Fund (IMF) meetings, when he decided to turn back after discussing developments with Venizelos, government officials said.
"The prime minister judged that he should not be away. He wants to ensure that all of Greece's commitments (to its EU partners) are fulfilled," government spokesman Ilias Mossialos told Reuters.
A government official speaking on condition of anonymity told Reuters pressure was high on Athens from euro zone partners to take additional measures to merit continued funding from a 110 billion euro ($150 billion) bailout to avert default.
"There is an issue of trust. Our partners want very specific steps and commitments and our record so far unfortunately does not inspire confidence," said the official.
Next week, Greece is due to resume talks with EU and IMF inspectors who will judge fiscal progress before releasing the next 8 billion euro loan tranche in October.
Greece has said it has cash until next month.
"It's a sign that things are very tight. Papandreou's presence is crucial to make sure there are no setbacks with issues that need to be resolved," said Theodore Krintas, head of wealth management at Attica Bank.
ELECTION CALL
The conservative opposition New Democracy party, which voted against the bailout that saved Greece from bankruptcy last year, seized the opportunity to make a fresh call for snap elections.
"The only solution is elections, so that the people's will is expressed," New Democracy leader Antonis Samaras said in a speech in the northern city of Thessaloniki.
New Democracy, which is leading the ruling socialists in opinion polls, says the policy mix used cannot bring Greece out of the crisis and austerity measures were stifling the economy.
The conservatives are riding a wave of public discontent after two years of austerity measures and are proposing tax cuts and growth boosting measures instead.
"When a policy hurts my country, I will surely say no. Why should I co-sign a mistake?" Samaras said. "We want this destructive policy toppled."
Apart from the slow pace of reforms and fiscal slippages, international lenders are most concerned with the lack of political consensus in Greece. Even if elections are held in 2013 as planned, the next government must apply agreed policies for the country to recover.
The ruling socialists have a majority in parliament but political analysts say internal dissent and public unrest, such as strikes and violent protests, may prompt snap elections.
Fiscal slippage this year, which the government blamed on a deeper-than-projected recession, forced Athens to slap a levy on property to make up for the shortfall as a target of capping its budget deficit at 7.6 percent of gross domestic product looked out of reach.
Lenders have long warned against one-off measures and more taxes as a way out of the crisis shaking the euro. They have asked for urgent reforms and privatisations and a drastic shrinking of the bloated public sector.
EU economic and monetary affairs commissioner Olli Rehn has said inspectors from the European Central Bank, EU and IMF would report back on progress in early October, meaning the next disbursement of aid to Greece could be paid by mid-October.
A second 109 billion euro bailout agreed in July, after it became clear Greece would not be able to return to bond markets, has also hit snags.
Euro zone partners are asking for collateral before giving Athens more cash and banks are slow to participate in a bond swap scheme key to the deal.
Papandreou was to meet United Nations Secretary-General Ban Ki-Moon in New York on Sunday and IMF head Christine Lagarde on Tuesday. Venizelos is still due to attend an IMF meeting in Washington later in the week.
(Writing by Dina Kyriakidou; Editing by Sophie Hares)
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