Open

Coming up

Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

Royal decree on low-cut tops

Read more

DEBATE

Ukraine, The Escalation: No Stopping Putin? (part 2)

Read more

DEBATE

Ukraine, The Escalation: No Stopping Putin?

Read more

FOCUS

Bangladesh: Textile workers' lives still at risk?

Read more

TALKING EUROPE

José Bové, Candidate for the EU Commission presidency, Group of the Greens

Read more

WEB NEWS

NYPD's online campaign backfires

Read more

ENCORE!

Celebrating the Bard's birthday in Britain

Read more

THE INTERVIEW

Yuki Tatsumi, Senior Associate of the East Asia Program, Stimson Center

Read more

INSIDE THE AMERICAS

USA: Executions halted over drugs secrecy

Read more

  • Russia orders military drills as Ukraine moves on separatists

    Read more

  • Israel halts Middle East peace talks over Hamas deal

    Read more

  • Platini: PSG in danger over Financial Fair Play rules

    Read more

  • Ségolène Royal denies banning cleavage at French ministry

    Read more

  • Afghan guard kills US doctors in Kabul hospital attack

    Read more

  • Palestinian unity deal stirs anger in Israel

    Read more

  • Video: Mayor in east Ukraine ready ‘to turn Slaviansk into battlefield’

    Read more

  • US would defend Japan in islands dispute, Obama says

    Read more

  • New far-right mayor moves to quash Paris region mosque

    Read more

  • US soldiers arrive in Poland as Ukraine crisis continues

    Read more

  • Fatah, Hamas agree to form Palestinian unity government

    Read more

  • Millions of Syrians desperately need aid, says UN

    Read more

  • Muslims in CAR pray for an escape route

    Read more

  • Madrid beat Bayern 1-0 in first leg of Champions League semis

    Read more

  • Britain's ex-PM Blair warns against spread of radical Islam

    Read more

  • Turkish PM offers condolences to descendants of Armenians killed in 1915

    Read more

  • Gay marriage, one year on: ‘French civilisation did not crumble’

    Read more

  • Colombian president reinstates firebrand Bogota mayor

    Read more

  • NYPD public relations campaign on Twitter goes awry

    Read more

  • In pictures: Violent protests erupt in Rio

    Read more

Europe

Greek premier vows to stay on amid party revolt

©

Text by News Wires

Latest update : 2011-06-16

Greek Prime Minister George Papandreou on Thursday vowed to lead his country out of its crippling debt crisis despite a revolt within his Socialist party earlier in the day as he struggles to pass an unpopular austerity plan.

AP - Greece was wracked by political turmoil Thursday as the embattled prime minister faced down a party revolt over new austerity measures - a bitter dispute that forced the EU to hint at new loans so Greece can fend off a summer default.

Prime Minister George Papandreou has struggled to garner support for a new package of €28 billion ($39.5 billion) in spending cuts and tax hikes demanded by the European Union and the International Monetary Fund, which last year granted his debt-ridden nation €110 billion ($155 billion) in bailout loans.

But the measures have sparked riots on the streets of Athens and open criticism from his own Socialist lawmakers. Papandreou’s desperate efforts to form a coalition government with the opposition conservatives collapsed Wednesday, and the political crisis deepened Thursday when two of Papandreou’s lawmakers resigned. He has promised a Cabinet reshuffling to ensure the austerity measures are passed.

The party feud heightened worldwide concern that a Greek financial collapse could trigger panic elsewhere in the 17-nation eurozone - a fear that saw borrowing costs in vulnerable EU countries surge and stock markets come under pressure.

“We will prevail and we will hold on. We have as a country in the past successfully faced major crises. As hard at this struggle is, we cannot run away from our fight,” Papandreou told party lawmakers in an emergency meeting Thursday. “We will fight and we will win, for Greece, its people and the future of the new generations.”

Jobless youth in Greece

Fearing further chaos, the EU’s top financial official, Olli Rehn, indicated in Brussels that Greece will likely get its next financial lifeline in July, despite the EU finance ministers’ failure to agree on a new bailout package for the country.

Rich EU countries like Germany and the Netherlands want private creditors to share a big part of the burden of helping Greece, while the European Central Bank fears those demands could trigger a partial default that would spark panic on financial markets and pummel banks in Greece and across Europe.

Rehn, the EU’s monetary affairs commissioner, said eurozone ministers would likely agree Sunday to give Greece the next €12 billion ($17 billion) loan from last year’s €110 billion package. However, the aid will only be paid if Papandreou’s government, which faces a vote of confidence within days, can get new budget cuts and privatizations through parliament before the end of the month.

The loan would keep Greece afloat until September and give finance ministers and the ECB until their next get-together in July to resolve their differences, Rehn said.

His comments raised hopes that Greece would avoid a quick default, alleviating the selling pressure on the euro, which had earlier fallen below $1.41 for the first time in three weeks.

But fears of a second Greek bailout drove the yield on Greece’s two-year bonds above 30 percent for the first time ever Thursday and kept the 10-year equivalent near all-time highs around 18 percent.

Even if a second bailout is granted to Greece, many analysts think the road will still end in default, and some even wonder if Greece will stay in the 17-nation eurozone.

“While an additional bailout package may stave off near-term disaster, a major debt restructuring seems inevitable at some point and Greece’s future in the currency union is looking ever more doubtful,” said Jonathan Loynes, chief international economist at Capital Economics.

Some economists fear that a Greek default would trigger financial chaos like the Sept. 2008 collapse of the U.S. investment bank Lehman Brothers.

“The risk of a ‘Lehman moment’ for the eurozone is increasing,” says Neil MacKinnon, analyst at VTB Capital.

Nout Wellink, a member of the ECB’s rate-setting council, said the situation means that European governments need to be ready to double the size of their bailout fund to €1.5 billion - a prospect sure to irritate German Chancellor Angela Merkel, who faces unrest at home over Germany’s role as the leading funder of bailouts.

In Athens, Papandreou said he would keep seeking a consensus with the opposition over the financial reforms that creditors have demanded.

“I will serve and continue to serve the effort for broader consensus and we hope that this effort ultimately is successful,” he said.

He admitted his government had displayed “mistakes and weaknesses,” but promised a new, stronger Cabinet in a reshuffle.

His strong words failed to reassure, and prominent Socialist lawmaker Vasso Papandreou was stinging in her criticism.

“The measures we are implementing are only cuts in salaries and pensions,” she said during the emergency meeting. “We voted for other measures but we have not implemented them.”

The lawmaker - who is not related to the prime minister - said Greece was in a worse condition now than when it first passed austerity measures last year.

“We have managed to mobilize nearly all of Greece’s society against us,” she noted.
 

Date created : 2011-06-16

  • GREECE

    IMF payout to buy EU time to agree new Greek aid plan

    Read more

  • GREECE

    Greek PM vows government reshuffle in face of default

    Read more

  • FRANCE

    French banks face ratings downgrade over Greek debt

    Read more

Comments

COMMENT(S)