Greece’s prime minister has shrugged off criticism over his handling of the country’s debt crisis while failing to explain an embarrassing delay in putting together a new cabinet.

George Papandreou told the nation on live television that he intended to reshuffle the cabinet on Thursday after abandoning plans to form a national unity government to tackle reform more effectively.

But instead of announcing the names of his new cabinet, Mr Papandreou had to defend his handling of the country’s debt crisis at an emergency meeting of the socialists’ parliamentary group.

He insisted his policies had worked, saying: “We have been fighting to save the country for the past 20 months – and it’s still standing.”

The delay has highlighted escalating tension in the governing socialist party, raising fears of a government collapse that could push Greece nearer to a disorderly default.

“This uncertainty is worrying . . . It damages Greece in the eyes of its European partners at a time when decisiveness is needed,” said a former socialist cabinet minister.

Greece’s parliament was due to hold a vote of confidence for the new cabinet on Sunday, then approve a new austerity package agreed with the European Union and the International Monetary Fund later this month. If deputies reject the package, Mr Papandreou would be forced to call a snap election. Greece would miss a €12bn loan tranche due to be disbursed in July and would risk defaulting on repayments of interest and principal on its debt.

Two prominent socialist deputies resigned their seats on Thursday, but the move does not affect the government’s six-seat majority as other socialists will be appointed in their place. Two other socialist deputies made clear they would not vote for the new austerity package, which would cut the public sector payroll by 20 per cent and lead to further job losses through an accelerated privatisation programme. Another 16 deputies criticised the package in a joint letter without making clear whether they would vote against it.

Vasso Papandreou, a former development minister and European Commissioner who called for the emergency meeting, appeared to be playing a leading role in the dissidents’ campaign.

A critic of the government’s harsh austerity policies, she is not related to the prime minister. “There doesn’t yet appear to be a co-ordinated campaign to bring down the government but the situation in the party is very tense,” said a socialist insider.

Mr Papandreou came under attack because he failed to consult with fellow-socialists before asking the conservative opposition leader to support him in forming a national unity government, a senior deputy said. “Greece is not a presidential republic . . . Papandreou cannot act alone on such matters,” the deputy said.

Talks with Antonis Samaras, the conservative opposition leader, broke down on Wednesday night amid growing pressure on the premier from close cabinet colleagues and advisers.

“We lost a historic opportunity that would have been backed by our European partners,” Mr Samaras said. “Unfortunately, the prime minister rejected a chance to build a consensus that could take the country forward.”

Analysts said the delay in announcing the new cabinet reflected the reluctance of high-profile ministers to switch posts, as well as unwillingness among potential recruits to join a government that could be shortlived.

It was not clear whether George Papaconstantinou, the finance minister, would keep his post. Andreas Loverdos, the health minister, who implemented unpopular pension reforms last year as labour minister, has been mentioned as a possible successor.

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