June 19, 2011

Greece’s Papandreou: ‘Catastrophic’ Default if Austerity Plan Is Rejected

Unpopular measures leading to possible big strikes

In the midst of demonstrations by Greeks and defections by members of his own political party, George Papandreou, the prime minister of Greece, addressed Parliament on Sunday to appeal for approval on Tuesday night of strict austerity measures that are deeply unpopular with politicians and citizens alike. He warned that the alternative would be disastrous.

(EU ministers early Monday delayed the bailout till July.)

Reuters reported that Papandreou told Parliament that Greece was at a critical crossroads and would soon be out of money unless the European Union (EU) and International Monetary Fund (IMF) proceeded with a second bailout package. That package is contingent on Athens adopting ever more severe measures to cut its debt and raise funds through higher taxes, layoffs in the public sector, and a selloff of public assets. Papandreou was quoted saying, "The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility."

Despite having shuffled his Cabinet after the departure of three ministers, Papandreou has a tough sell ahead, regardless of the consequences. Only 34.8% of Greek citizens want the bailout package approved; 47.5% want Parliament to reject the package and more want early elections held rather than allow Papandreou to serve out his full term.

Strikes and demonstrations have marked the debate over the bailout's conditions, with the Greek state utility PPC promising a 48-hour strike to begin at midnight Sunday. Utility workers are protesting government plans to sell off and privatize the utility to raise money; the strike could cause rolling blackouts.

In his address, Papandreou was quoted saying, "It is a great opportunity for me to repeat the strong commitment of the Greek government and the strong will of the Greek people for the implementation of the program."

But the commitment of both Greece's government and its people does not seem all that devoted to carrying out the will of the EU and the IMF. Instead, before Parliament, main opposition leader Antonis Samaras challenged Papandreou to step down so that new elections could be held and the bailout package renegotiated. "Why is the government insisting on us supporting the mistake?" Samaras asked. "It does not want consensus but complicity.”

(Read Mohammed El-Erian's take on Greek debt crisis.)

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