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Latest update: 05/11/2011
- bailout - debt - eurozone - George Papandreou - Greece - referendum
Papandreou seeks new coalition after surviving crucial vote
Having narrowly survived a confidence vote, Greek Prime Minister George Papandreou met President Karolos Papoulias on Saturday in a bid to form a new coalition government that would push through a vital but unpopular €130 billion bailout package.
AP - Greece’s prime minister struggled Saturday to form a temporary coalition government in the near-bankrupt country, extending a political deadlock threatening billions in international rescue funds.
In an impassioned plea to parliament late Friday, George Papandreou agreed to step aside as premier if necessary to help hammer out a coalition, offering to include the conservative opposition party - a possibility swiftly rejected by its leader.
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Papandreou said a new coalition government would need four months to secure the new €130 billion ($179 billion) rescue agreement and demonstrate the country’s commitment to remaining in the eurozone. “Cooperation is necessary to guarantee - for Greece and for our partners - that we can honor our commitments,” Papandreou said at a meeting Saturday with President Karolos Papoulias, hours after his Socialist government narrowly survived a confidence vote.
“I am concerned that a lack of cooperation could trouble how our partners see our will and desire to remain in the central core of the European Union and the euro.”
But Papandreou’s plea was snubbed by conservative opposition leader Antonis Samaras.
“We have not asked for any place in his government. All we want is for Mr. Papandreou to resign, because he has become dangerous for the country,” Samaras said in a televised address. “We insist on immediate elections.” Samaras was due to meet the president at 1:00 p.m. (1100GMT) Sunday. Frustrated with Greece’s protracted political disagreements, the country’s creditors have threatened to withhold the next critical €8 billion ($11 billion) loan installment until the new debt deal is formally approved in Greece.
Greece is surviving on a €110 billion ($150 billion) rescue-loan program from eurozone partners and the International Monetary Fund. It is currently finalizing a second major deal: to receive an additional €130 billion ($179 billion) in rescue loans and bank support, with banks agreeing to cancel 50 percent of their Greek debt.
Midway through his four-year term, Papandreou was forced by his austerity-weary Socialist party into seeking cross-party support after he abandoned a disastrous proposal to hold a referendum on a new European debt deal - which prompted havoc on world markets and anger from creditors. Papandreou’s popularity has been battered by two years of punishing austerity, causing crippling strikes, violent protests and sharp drop in living standards for ordinary Greeks who face repeated rounds of tax hikes and cuts in pension and salaries.
Late Friday, Papandreou won a confidence vote in the Socialist-led parliament on a pledge that he was willing to quit and form a caretaker coalition.
But he insisted an immediate election would paralyze government and endanger the new rescue deal.
The conservative snub left Papandreou with limited options: negotiating with conservative splinter groups and independents to attract consensus, and possibly invite respected non-politicians to join the effort. “(Papandreou) will not resign immediately and he cannot resign before there is a new government. What remains to be seen is how flexible he will be in seeking a different governmental makeup,” Ilias Nicolacopoulos, a prominent political analyst told AP television. “There will be a tough game of poker.”
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Comments (2)
The IMF should deposit
The IMF should deposit immediately the 6th installment cause we will not believe our eyes on Monday.
My view of how the markets
My view of how the markets will take an upstream instead of the opposite way: Greece was a country in deficit since 1989 although manageable and viable and when the world financial hit Greece in the 3rd quarter of 2008 the Greek banks cut liquidity which subsided growth and declined taxable income which lead to higher state borrowing from the markets. By 2009 Greece was officially in recession as the spreads pick up while the state tried to fill the cap by tied fiscal policy without any state spending reduction which caused the private sector to further decline in recession while the state deficit continue to increase. By the 2nd quarter of 2011 Greece enter into depression where the decline speed up. The only way those things can be speed fixed is to flood the Greek market with a massive increase in the money supply. There is no time right now to fix things up and the only realistic solution is to receive immediately the 6th and soon the 7th IMF bail out installment while speed up the ratification of the new bail out with the loans and bond swaps and even more funds available from the EU subsidies somewhere around 18 billion that Greece has not used. Even with within this wrong state system and the risk that some of that money being misused the money supply should increase immediately or will collapse and then surgically specific management changes in the failed to do business Greek public sector and correct fiscal policy will balance out the GDP with the dept which will manage the deficit. Papandreou’s mistakes were wrong fiscal policy, wrong internal devaluation and on purpose refusal to reduce public spending and into a smaller more manageable Greek state. Merkel and Sarkozy’s mistakes wore to oppose austerity as a solution, while wrongly believe that the Greek tax fraud is more than in their own countries.
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