March 29, 2024

Greek Leader, Papandreou, Wins Vote in Push to Save Debt Deal

Mr. Papandreou pledged to form a unity government with a broader consensus, regardless of whether he would lead it.

The moves ended a frenetic week that began with Mr. Papandreou’s surprise call for a referendum on Greece’s new debt agreement with the European Union, which threw financial markets into disarray and even threatened to spread the financial contagion to Italy. He was then forced to back away in a humiliating about-face and saw his domestic support crumble rapidly, even within his own party.

In the 300-member Parliament, Mr. Papandreou received 153 votes. His total included the support of all members of his Socialist Party, known as Pasok, and an independent; several members who had said they would oppose the prime minister ultimately rallied to support him. Mr. Papandreou had widely been expected to step down after the confidence vote, but he said early Saturday that he would explore the composition of a transitional unity government in a meeting with President Karolos Papoulias later in the day. Finance Minister Evangelos Venizelos said the interim government would govern until the end of February, with early elections expected in March.

The confidence vote was essentially cast as a vote on the debt agreement reached with European leaders in Brussels last week, and its passage suggested that Parliament was likely to formally approve the deal. It also appeared to clear the way for Greece to receive the next installment of aid, $11 billion, next month; Greek officials have said that without the additional funds, the country would run out of money to cover expenses by mid-December.

Had Mr. Papandreou lost the vote, his government would have been brought down, throwing the debt agreement into jeopardy and possibly leading to a Greek default and its departure from the euro zone, the 17 nations in the European Union that use the currency. The prime minister’s volatile moves during the week appear to have succeeded in averting those events, at least for now.

But the vote did not resolve the continuing political drama in Greece, including what will be the composition of the next government. Amid growing social unrest in a country whose economy has been decimated by the debt crisis and austerity measures, a new government will have the difficult task of getting formal approval of the debt deal and carrying out the structural changes to which Greece has already pledged itself, including dismissing government workers.

A few hours before the vote, Mr. Papandreou offered a final appeal to Greek lawmakers, declaring his willingness to open immediate talks on a coalition government and to step aside for the good of the country. “The last thing that interests me is my seat,” he said. While the prospect of Greece’s leaving the euro zone, however remote, has been set aside for now, the country is likely to face a caretaker government increasingly seen as beholden to the European Union and the International Monetary Fund, Greece’s foreign lenders.

Mr. Papandreou told the lawmakers that he had viewed a referendum as a form of “direct democracy,” a nod to protesters who have been calling for a greater say in their country’s future amid a growing sense that Greece was no longer in control of its own affairs. 

The idea of a referendum not only caused market turmoil, but it also infuriated European leaders, who gave Mr. Papandreou a serious dressing down in Cannes, France, on Wednesday. It also provided political leverage for the prime minister; Mr. Papandreou dropped the idea only after the conservative opposition, the New Democracy Party, altered its position and said it would support the debt deal.

The New Democracy leader, Antonis Samaras, who has said he would not join a coalition government if it was led by Mr. Panapndreou, repeated his demand for early elections after the confidence vote. On Thursday, he accused Mr. Papandreou of deception and “blackmailing” the Greek people by proposing a referendum.

Niki Kitsantonis contributed reporting from Athens.

Article source: http://www.nytimes.com/2011/11/05/world/europe/greek-vote-european-debt.html?partner=rss&emc=rss

Uncertainty Over Greece Weighs on Financial Markets

Stocks on Wall Street were mixed in early trading on Thursday. Shortly after the opening, the Dow Jones industrial average was slightly higher, by about 12.41 points. The Dow had closed down 1.5 percent, at 11,897.27 points, on Wednesday as concerns about Greece were compounded by new fears about the pace of the United States economic recovery.

In early trading, the Standard Poor’s 500-stock index was up by 1.44 points, while the Nasdaq composite index fell 3.17 points. Both had closed down more than 1.7 percent on Wednesday.

The euro slipped, Asian and European stocks faltered and the yield on bonds of the more indebted European nations climbed.

Spain sold $4 billion of bonds at an auction Thursday, missing its top target and with average yields creeping upward again.

In Greece, Prime Minister George Papandreou said he would reshuffle his Cabinet and request a vote of confidence in Parliament after talks with the opposition about a unity government foundered.

With just a five-seat majority in Parliament, Mr. Papandreou has been struggling to get his government behind additional austerity measures demanded by its foreign creditors, and to contain growing rifts within his party

Meantime, there remained no agreement among Greece’s euro-area partners over a second emergency loan package. Talks have stalled over the extent to which private bondholders should share the burden in any new rescue.

In a statement Thursday, however, the European Union’s commissioner for economic affairs, Olli Rehn, said that he expected euro-zone finance ministers to sign off on the payout of 12 billion euros ($17 billion) for Greece from the original bailout on Sunday, and to decide on a second bailout in early July as well as the extent of private sector involvement.

“This two-step approach,” he said, “means that the funding of the Greek sovereign debt can now be ensured until September, while we take the decisions for the medium-term, beyond September, in July.”

Mr. Rehn added that he expected the Greek Parliament to agree new austerity measures.

Germany’s insistence on the role of private investors in the next bailout has contrasted with that of France and the European Central Bank, which are backing a position that would be less punishing to bondholders. On Thursday, President Nicolas Sarkozy of France called for a sense of “responsibility” and “compromise” on the issue.

“Everyone in every corner of global financial markets should be keeping a very close eye on upcoming Greek events,” the Deutsche Bank strategists Jim Reid and Colin Tan said in a research note, “The period is resembling the build-up to the Lehman collapse where, although markets were increasingly nervous, virtually everyone expected a last-minute buyer.”

“The only way to arrest the slide is if everyone backs down from their current position or if one side backs down significantly,” the analysts added. “The risks are building as the situation gets ever more difficult.”

China, which has purchased billions of euros in European debt and recently signaled its willingness to buy more, reaffirmed its support Thursday ahead of a visit next week by Prime Minister Wen Jiabao to Hungary, Germany and Britain.

“We hope Greece can realize stability and development through cooperation with the E.U. and the international community,” a foreign ministry spokesman, Hong Lei, was quoted as saying by The Associated Press in Beijing.

The febrile mood in the markets was accentuated by comments late Wednesday from the Irish Finance Minister, Michael Noonan.

He said that Dublin was ready to impose losses on senior unsecured bond holders of Anglo Irish Bank and Irish Nationwide Building Society if the European Central Bank agreed. His comments came after a meeting with the International Monetary Fund, which, he said, understood his position.

The remarks added to negative sentiment surrounding the financial sector following the announcement Wednesday of a review by Moody’s Investors Service of major French banks in the light of their exposure to Greece.

The financial services component of the Euro Stoxx 600 index was down 1.7 percent at midday Thursday. The CAC-40 index in Paris was down 1.1 percent, while the broader Euro Stoxx 50 index of blue chips shed 0.8 percent.

That followed drops in Asian markets, including 1.9 percent in Australia and South Korea and 1.8 percent for the Hang Seng index in Hong Kong.

The Nikkei 225 in Japan sagged 1.7 percent, the Taiex in Taiwan dropped 2 percent and stocks in mainland China fell 1.5 percent.

“There has been a complete loss of confidence,” said Francis Lun, managing director at Lyncean Holdings in Hong Kong. “With Greece on the verge of default, there are now fears that there will be a wider financial crisis.”

The euro was trading at $1.4117 Thursday, down from $1.4180 late Wednesday. Yields on benchmark Spanish, Greek, Portuguese and Italian government bonds climbed, while yields on safer German and British bonds fell.

Christine Hauser contributed reporting from New York, Bettina Wassener from Hong Kong and Stephen Castle from Brussels.

Article source: http://www.nytimes.com/2011/06/17/business/global/17markets.html?partner=rss&emc=rss