New Greek government in race against time

12th November 2011, Comments 0 comments

Greece's new prime minister Lucas Papademos held urgent talks Saturday with French President Nicolas Sarkozy and German Chancellor Angela Merkel on the bail-out for his debt-hit country.

Both Sarkozy and Merkel underlined the need for Greece to implement the measures it had agreed to in return for the next instalment of an international loan, a statement from Sarkozy's office said.

"The payment of the next tranche (of the bailout) can only take place when a decisive step has been taken in this matter," the French presidency said in its statement.

In separate talks, the French and German leaders "reaffirmed their determination to totally defend the euro", it added.

Greece's new unity government under Lucas Papademos faces a race against time to save the debt-stricken nation from bankruptcy after a historic power-sharing deal struck between warring parties.

Daily newspaper Kathimerini has hailed the new cabinet -- a power-sharing mix of Pasok socialists, New Democracy conservatives and far-right nationalist party Laos -- as "a government of balance and agreement".

But financial daily Naftemporiki reminded the new government that its priority was "stabilising of the economy in difficult conditions, both at home and in the eurozone".

Greek Finance Minister Evangelos Venizelos, who kept his job, said Friday he hoped the latest slice of the bailout agreed for Greece would be paid soon after another EU finance ministers meeting on November 17.

First though, the Greeks have to implement the measures agreed at the EU summit in Brussels on October 26-27: Venizelos said this was "urgent" and would be done "no later than Monday or Tuesday".

As part of the deal, private banks are to accept writedowns of 50 percent, which will allow Greece to wipe out nearly a third of its 350-billion-euro debt.

The procedure to confirm the new government -- which was voted in with a comfortable 254 out of 300 cross-party votes -- in parliament will begin Monday with a vote of confidence, expected Wednesday.

It must then force through the painful austerity measures exacted as the price for a second EU rescue package of 100 billion euros in loans, the same amount in debt reduction and a further 30 billion in guarantees.

But refilling the state coffers is not the only challenge for the new government.

It will also have to manage a delicate power-sharing deal and enact reforms quickly to appease public resentment.

"The government will have to be very quick on economic issues," political analyst Ilias Nicolakopoulos told AFP.

"We will have a 2012 budget vote before the end of December as well as the Brussels plan of 26/27 October."

The strikes that started under Papandreou were set to continue as the main public service union Adedy called for three-hour stoppages, starting Tuesday, in protest at rising taxes and 30,000 job cuts across the civil service.

Demonstrations were expected on Thursday, November 17, a date laden with significance in Greece: it marks the anniversary of huge protests in 1973 by students at the Athens Polytechnic University against the then junta.

The government also faces continuing opposition from the KKE communist party and radical left party Syriza.

They both refused to join the new coalition, saying they opposed Greek complicity with the International Monetary Fund and the EU-led policy that obliges Greece to impose austerity measures.

The European Commission forecasts a 2.8 percent contraction for the Greek economy in 2012 and a further increase in unemployment. Already in August stood at 18 percent.

So there unlikely to any respite for Papademos.

© 2011 AFP

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