Thu, Jun 23, 2011 - Page 1 News List

Greek PM survives confidence vote as austerity plan looms


After surviving a crucial confidence vote, Greece’s struggling prime minister prepared yesterday for his next political battle — getting a new austerity package through parliament to avoid a default on the national debt.

Greece’s international creditors demand that Greek Prime Minister George Papandreou get approval for 28 billion euros (US$40.24 billion) in budget cuts and new taxes and a 50 billion euro privatization drive by the end of the month before handing over 12 billion euros in bailout funds to save the country from bankruptcy in the middle of next month.

A default could drag down Greek and European banks and shake the finances of other weak eurozone countries such as Portugal, Ireland and Spain.

All 155 lawmakers from Papandreou’s Socialist Party voted to back their leader in the 300-seat parliament late yesterday, eliminating the chance of early elections and shoring up confidence in markets.

After the vote, the euro remained buoyed, the Athens stock index rose 1.5 percent and the Greek bond yields dropped for a second day running, a sign investor confidence is improving slightly.

The vote offered some encouragement for the embattled prime minister, who has had to contend with strikes, riots and dissent within his own party because of the deeply unpopular measures.

However, Papandreou’s struggles are far from over. He still needs to convince several of his own deputies to support the austerity measures that they have publicly criticized. At least one deputy said he would not back them.

Papandreou was due to meet with lawmakers from his party later yesterday to begin shoring up support for the measures scheduled for a parliamentary vote on Tuesday next week.

Greece is being kept financially afloat by a 110 billion euro package of bailout loans granted by other eurozone countries and the IMF last year, and has implemented strict austerity measures in return, cutting public sector salaries and pensions, increasing taxes and overhauling its welfare system.

However, the country has struggled to meet it targets, missing many, and is now in negotiations for a second bailout, which Papandreou has said will be roughly the same size as the first.

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