July 13, 2024

Pressure Rises for Greece Ahead of Confidence Vote

The Socialist prime minister, George Papandreou, requested the confidence vote last week after a cabinet shuffle aimed at shoring up internal support as he works to push through measures demanded by foreign lenders before they release the next aid package. The confidence vote is scheduled for Tuesday evening and is to be followed by a vote on the new measures in Parliament next Tuesday.

Those measures — which include tax increases, wage cuts and the privatization of about $70 billion in state assets — have met with howling popular resistance. Power company workers started rolling blackouts on Monday and unions called a 48-hour general strike for next week after protests last week, some of them violent.

In Brussels on Monday, Mr. Papandreou said that Greece would do whatever it took to pass the austerity measures, and he asked for patience from the country’s European partners.

“We do hope that the European Union will also have the similar will, a unity of purpose to not only support what Greece is doing, but also show the necessary strength for a crisis which has obviously not only reached Greek dimensions but a wider European dimension,” he said.

Analysts and Socialist Party insiders said that Mr. Papandreou seemed likely to succeed in passing the austerity package, having secured more support within the party. But economists were nearly unanimous in predicting the loans would only buy time, doing nothing to pull the country out of its economic morass and potential default.

Nevertheless, the loans are essential to avoid an immediate default. “When you’re on the respirator, every minute is precious,” said Nikos Kostandaras, the editor of Kathimerini, a center-right daily.

Fearing that Greece does not have the political will to impose and enforce a raft of austerity measures, European leaders have been pressing Mr. Papandreou to broaden his consensus in order to strengthen Greece’s political stability.

Last week, the prime minister tried unsuccessfully to forge a government of national unity with New Democracy, the center-right opposition party that was in power when Greece went off the deficit cliff. New Democracy is opposed to many of the terms of the austerity pact sealed between Greece and its foreign lenders last year and has called for tax cuts in addition to spending cuts.

After that gambit failed, Mr. Papandreou shuffled his cabinet on Friday, bringing in as finance minister Evangelos Venizelos, a Socialist Party veteran who lacks experience in international financial circles but is seen as wielding the clout to get the fractious party in line behind the measures.

He replaces George Papaconstantinou, an economist who has been the face of Greece’s international negotiations since the government came to power in 2009, and becomes environment and energy minister, with responsibility for privatizing the state electric utility in the face of its recalcitrant union.

In his first appearance as finance minister on Monday, Mr. Venizelos said that it was critically important for Greece’s Parliament to approve the austerity measures and secure a fifth installment of the $155 billion rescue program pledged to the debt-ridden country last year.

“There is an immediate and urgent need to restore the country’s credibility, as far as the implementation of the program is concerned,” Mr. Venizelos said in a statement after talks with his euro zone peers in Luxembourg. “Each day is of extreme importance so we cannot afford to waste a single hour,” he added.

Giorgos Floridis, a prominent Socialist member of Parliament who gave up his seat last week, said he was “absolutely sure” that the government would pass the confidence vote on Tuesday as well as the austerity package next week.

Mr. Floridis had been expected to join the new cabinet until he bolted, saying that the leaders of both parties had “failed to rise to the critical challenges faced by the country.” He said he had not given up hope of a national unity government.

“The internal crisis within Pasok has been resolved,” he said, referring to the Socialist Party. “But how long that crisis will remain resolved is another question.”

While the political situation simmered, inspectors from the European Union and the International Monetary Fund were expected to visit Athens again this week, to look into changes that Greece wants to make to the plan, Olli Rehn, the union’s monetary affairs commissioner, said on Monday.

Just before last week’s shuffle, and facing a growing unrest within his party, Mr. Papaconstantinou quietly agreed to refrain from raising the levy on heating oil or lowering the value of property that can be excluded from taxes to $143,000 from $572,000, as the plan originally proposed.

Some experts are beginning to question not only Greece’s ability to stick to its austerity plan but the feasibility of the plan itself, saying that harsh austerity measures without any prospect of returning to growth is a recipe for disaster.

“Something is needed, maybe some sort of growth stimulus, which can only come from the euro zone,” said George Pagoulatos, a professor of political economy at Athens University of Economics. He added that there was “general pessimism” about whether Greece could return to growth by 2012. “The problem is that the government is reforming at the same time it is applying a program of fiscal consolidation at a time of recession,” he added. “It’s a very painful mix.”

Article source: http://feeds.nytimes.com/click.phdo?i=bd649efb360c53e06c6664631361e04a

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