By Renee Maltezou
ATHENS (Reuters) - The smallest party in Greece's ruling coalition pulled out of the government on Friday after a row over the abrupt closure of the state broadcaster, leaving Prime Minister Antonis Samaras with a tiny majority in parliament.
After talks on resuming broadcasts on the ERT radio and television station collapsed late on Thursday, Democratic Left lawmakers voted to withdraw their ministers from Samaras's cabinet.
They have yet to decide whether to offer external support in parliament to keep Greece's international bailout on track.
The leftist party's departure was blow to the conservative Samaras, who is left with a three-seat majority in parliament, making it tougher to pass unpopular reforms demanded by foreign lenders and emboldening the hard left opposition.
In a defiant address to Greeks after midnight, Samaras said he was ready to press ahead without the leftists if necessary.
"I want us to continue together as we started but I will move on either way," Samaras said in a televised statement.
His spokesman, Simos Kedikoglou, said Samaras had sufficient majority "to lead the country out of the crisis".
The row coincided with a new hitch in Greece's EU-IMF bailout with the discovery of a potential funding shortfall due to the reluctance of some euro zone central banks to roll over their holdings of Greek government bonds.
Ten-year Greek government bond yields rose to their highest since late April, while Greek stocks tumbled 6 percent.
Samaras's conservative New Democracy party and its Socialist PASOK ally command 153 deputies in the 300-seat parliament, so they can muddle through for a while without the Democratic Left's 14 lawmakers, but the outlook is more unstable.
"The government can't last for long in its new shape. The horse-trading will begin, there will be more crises, they won't be able to push reforms," said John Loulis, a political analyst.
Officials from all three parties ruled out snap elections for now, which would derail the bailout program.
"The country doesn't need elections," Democratic Left leader Fotis Kouvelis said in a statement, saying the party would continue with its reform policy.
The decision to pull out was not unanimous and four party officials later called it a "suicidal" move. "This was a leap into the void," they said in a statement.
EU, IMF WATCHING
An ongoing inspection visit to Greece by the European Union and the International Monetary Fund needs to be completed as planned in July to avoid funding problems, the lenders said on Thursday. That may require new savings measures to plug the gap.
At least two independent lawmakers have suggested they would back Samaras's government, which came to power a year ago in an uneasy pro-bailout coalition aimed at ensuring Greece stayed in the euro zone after nearly going bankrupt.
The coalition has bickered over a range of issues from austerity policies to immigration, and lawmakers from Samaras's parties have accused Democratic Left of blocking public sector reforms needed to secure bailout funds.
"There is also a flip side which I see as positive - it's easier for two parties to agree on policies than three," said Theodore Krintas, a fund manager at Attica Bank.
The latest crisis began 10 days ago when Samaras abruptly yanked the ERT public radio and television station off air and fired its 2,600 workers, sparking an outcry from his two allies, unions and journalists.
Calling it a "sinful" and "wasteful" hotbed of political patronage, Samaras said the move was necessary to hit public sector layoff targets set by Greece's EU and IMF lenders.
After initially refusing to restart ERT, Samaras said on Thursday he had offered during talks with his allies to re-hire about 2,000 workers at a new broadcaster, a compromise accepted by PASOK but rejected by the Democratic Left.
"We will no longer have black screens on state TV channels but we are not going to return to the sinful regime," he said.
But Democratic Left insisted that all workers be rehired, saying the issue at stake was far bigger than state television broadcasts and about protecting democracy and the rule of law.
PASOK, the mainstream center-left party that has been decimated in Greece's debt crisis and would likely lose more ground in a new election, has said it will continue backing the government even without the Democratic Left.
PASOK is expected to get a bigger role in the government after Democratic Left's departure, with its lawmakers likely to fill more ministerial positions as part of a reshuffle expected as early as over the weekend.
ERT remains off air despite the court rulings ordering it back on, though workers have continued broadcasting a 24-hour bootleg version on the Internet from their headquarters.
The finance ministry ordered workers on Friday to leave ERT's headquarters, where protesters have been gathering since its closure on June 11, in order to set up the transitional broadcaster with 2,000 workers.
(Additional reporting by Karolina Tagaris, Harry Papachristou and Lefteris Papadimas; Writing by Deepa Babington; Editing by Paul Taylor)