Friday, November 4, 2011

End of the Greek Crisis?

Harry Papachristou and Renee Maltezou of Reuters report, PM wins vote, Greece still faces uncertainty:

Greek Prime Minister George Papandreou survived a parliamentary confidence vote on Saturday, avoiding snap elections which would have torpedoed Greece's debt crisis bailout deal and inflamed the euro zone's economic crisis.

But the nation remained mired in political, social and economic turmoil and Papandreou signaled he would stand down, calling for a new coalition to ram the 130-billion-euro bailout deal through parliament and avoid the nation going bankrupt.

Papandreou's socialist government won with 153 votes in the 300 member parliament, and a rebellion by some dissidents in his PASOK party failed to materialize after he indicated that his term as prime minister was close to an end.

"The last thing I care about is my post. I don't care even if I am not re-elected. The time has come to make a new effort ... I never thought of politics as a profession," he told parliament before the vote.

Papandreou said the new coalition government should secure the approval of the euro zone bailout deal, the nation's last financial lifeline, which is also the euro zone's central plank to prevent economic crisis devastating the bloc's bigger economies.

The leaders of France and Germany told Papandreou earlier this week that Greece would not get one more cent of EU aid if it failed to approve the bailout, meaning that the state would run out of money in December.

Papandreou told parliament that he would go to the Greek president on Saturday to discuss formation of a broader-based government that would secure the euro zone bailout, adding that he was willing to discuss who would head a new administration.

The meeting will take place at noon (6 a.m. EDT).


Papandreou dismissed demands for rapid elections as championed by the opposition. "Elections at this moment not only equal disaster but could not take place in the best interest of the people," he said.

"There is one solution. To support the (EU bailout) deal with a multiparty approach, without elections, with a strong government."

Greece has been racked by torment since soon after Papandreou won power in 2009 and revealed that the real budget deficit was three times bigger than original estimates put out by his conservative predecessor.

International investors took fright, Greece's borrowing costs soared and Papandreou was forced to go cap in hand last year to the only bodies still willing to lend at affordable rates -- the European Union and IMF.

In return they demanded wave after wave of spending cuts, tax rises and pension cuts which provoked widespread protests on the streets on Greek cities, with bloody clashes between demonstrators and riot police in Athens.

On financial markets, analysts said Papandreou's victory had been Pyrrhic, and many ordinary Greeks said they were disenchanted with Byzantine political wrangling that was not addressing their basic shortage of jobs and cash.

"Even though he has won the vote, he engaged in a game of brinkmanship ... All that means to me is that his days in power are numbered," said Jurgen Odenius at Prudential Fixed Income, in Newark, New Jersey.

"At least, though, the worst has been avoided, where no new government was formed and Greece gets pushed into default. So at least we're back to where we were before."

Sources said Finance Minister Evangelos Venizelos has won the backing of leaders of some smaller parties to support a new coalition that he would head. The new government would call early elections in a few months after the bailout had been secured, sources close to the deal told Reuters.

The leaders of the far-right LAOS party and another center-right party indicated after Papandreou's speech that they would cooperate in a new coalition.

In parliament, Venizelos said a new government should rule until next February and then call elections.

Opposition leader Antonis Samaras counted his New Democracy party out of the coalition, saying Papandreou had spurned his call for a national unity government. "Mr Papandreou rejected our proposal. The only solution is elections," he said.

Papandreou provoked uproar at home and abroad on Monday when he announced a referendum on the bailout, agreed by euro zone leaders only last week.

Under heavy domestic and international pressure, he backed down on a vote which could well have rejected the deal, potentially sinking euro zone leaders' attempts to stop the debt crisis devastating economies such as Italy and Spain.

The government officially announced earlier on Friday that the referendum would not go ahead.

Bloomberg reports that the masks have fallen:

Papandreou reinstated Louka Katseli, a former labor minister, to the ruling party’s parliamentary group after she cast a vote supporting the government. Her return brings Papandreou’s majority back to 153.

“The masks have fallen,” Antonis Samaras, head of the New Democracy party, said in an e-mailed statement from his Athens- based office today. “Papandreou has rejected all of our proposals. The responsibility he bears is huge. The only solution is elections.”

The Communist Party of Greece, the third-largest party with 21 seats, and Syriza, which has nine, also rejected the overture from Papandreou, and called for elections. “I won’t bow to blackmail,” Communist Party leader Aleka Papariga said.

The government will need the backing of 180 lawmakers to secure approval for Greece’s second aid package that was agreed in Brussels last month. Disbursement of funds was halted after Papandreou’s call for a referendum was opposed by German Chancellor Angela Merkel and French President Nicolas Sarkozy.

“In the eyes of Angela Merkel and Nicolas Sarkozy he doesn’t have much credibility left,” Jacob Kirkegaard, research fellow at the Peterson Institute for International Economics, said in a Bloomberg TV interview. “Greece needs to have a new face to the rest of the world.”

Broader Government

Papandreou, a graduate of the London School of Economics and former foreign minister, had survived a confidence vote in June called to rally support for austerity measures demanded by international lenders in return for a continuation of a 2010 bailout, the first for an EU nation. The EU and International Monetary Fund agreed to provide 110 billion euros ($135 billion) in May last year in return for cuts in government spending and public sector jobs.

His referendum plan triggered a suspension in assistance by EU leaders less than a week after they’d approving a second rescue that wrote down the value of Greek debt by 50 percent.

Resolve Deadlock

Papandreou’s inability to resolve the political gridlock pushed the country closer to the first default by an EU nation even as his scrapping of a referendum averted potential ejection from the 17-member euro region.

European Commission President Jose Barroso said he expected a government of national unity will approve last week’s bailout agreement with the EU before Greece runs out of funds, which Greece says could happen in mid-December.

The surprise referendum announcement triggered the biggest two-day slide in the MSCI World Index in almost three years and sent spreads on French, Greek and Italian bonds over bunds to euro-era records. Greek two-year bond yields climbed above 100 percent for the first time yesterday after the EU blocked aid.

St. Paul, Minnesota-born Papandreou, whose father formed the party at the end of Greece’s military rule, had said he was prepared to lose his job if it meant pushing through austerity measures needed to fix Greece’s finances. The nation’s debt is expected to balloon to 162 percent of gross domestic product this year.

“I would be very surprised if Greece doesn’t default in the next few weeks,” Lex Van Dam, who manages $500 million in assets at Hampstead Capital LLC in London. “I cannot see how the Europeans will pay the next tranche knowing that the Greeks will try and renegotiate the rest of the original Oct. 26 package once this payment has been made.”

In the end, Papandreou's gamble didn't pay off but he managed to avert national elections and Greece escaped bankruptcy, for now. The call for a referendum caused an uproar in Greece and elsewhere. Papandreou's move did however expose the New Democracy party and communist parties for the total frauds they are. Nouriel Roubini was right to slam the New Democracy party:

American economist Nouriel Roubini has used his account on social media network Twitter to launch an attack on New Democracy, which he accused of lacking credibility because of the way the conservatives handled the Greek economy when they were in power between 2004 and 2009.

“The corrupt (New Democracy) who ramped up fiscal deficits to 15% of GDP & shamelessly lied about it now want to run Greece's government again,” wrote Roubini.

“The Greek fox (New Democracy party) that raided the chicken coop now claims it wants to guard it again. Their credibility is dirtier than mud.”

Roubini claims to have predicted both the collapse of the United States housing market and the worldwide recession which started in 2008, earning him the nickname of “Dr Doom.”

Dr. Doom is bang on, the credibility of New Democracy and its opportunistic leader, Antonis Samaras, is dirtier than mud. And don't get me started on the communists and their hypocritical leaders, they're living in fantasyland and are a national embarrassment. My hope is that the current Finance Minister, Evangelos Venizelos, leads the new unity government through this turbulent time (he's the smartest and toughest SOB in Greek politics).

More worrisome, Roubini is now predicting that eurozone will collapse and that world markets will follow. He's not alone, others are predicting the exact same thing. Indeed, as I wrote in my earlier comment, the specter of deflation is haunting the G-20, and while the crisis in Greece got the ball rolling, the real concern is Italy and Spain.

Let me end by stating that I was extremely impressed with Papandreou's pre-vote speech. I heard it live and he sounded genuine and unyielding in his conviction that he's doing the right thing for the country. While the world lambasts Greece and Greeks, I know that my ancestral home and its proud citizens will survive and come out of this crisis much stronger. Below, listen to an English translation from part of Papandreou's speech and comments from Al Jazeera's Barnaby Phillips.

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