Tue, Jun 28, 2011 - Page 6 News List

Greece to debate austerity package

‘CATASTROPHE’:Greek Defense Minister Panos Beglitis said that a failure to pass the measures would send the country into bankruptcy, default and government collapse

Reuters, ATHENS and PARIS

Whistles are seen in front of the parliament during a rally against the austerity economic measures and corruption at Syntagma Square in Athens, Greece, on Sunday.

Photo: Reuters

A Greek minister warned yesterday of “catastrophe” if parliament blocked a 28 billion euro (US$40 billion) package of tax increases and spending cuts after signs of revolt by some deputies in the ruling PASOK party.

Greece’s conservative opposition has rejected EU leaders’ calls for national unity, forcing Greek Prime Minister George Papandreou to rely on his slim parliamentary majority to push through the package.

Without approval for the measures, the EU and IMF say they will not disburse the fifth tranche of Greece’s 110 billion euro bailout program.

Athens needs the 12 billion euros to pay its bills next month and avert the eurozone’s first -sovereign default, which would send shockwaves through a jittery global financial system.

“I believe [the austerity plan] will pass. There are concerns, there is anguish, but above all there is common ground among PASOK’s parliamentary group to assume a common responsibility,” Greek Defense Minister Panos Beglitis told Skai TV.

“Voting against the plan would lead the country into big difficulties the next day, bankruptcy and default,” he said, warning that fresh elections, which would inevitably follow a defeat in parliament, would be a “catastrophe” for Greece.

A parliamentary ballot on the framework austerity package is expected tomorrow, with lawmakers then due to vote on Thursday on a bill containing specific steps to implement it.

Defections over the past 13 months have squeezed Papandreou’s support in the 300-member parliament to 155 seats, but now at least three PASOK deputies have expressed doubts or outright opposition to the plan and said they may vote against it.

In an interview with Spanish daily El Mundo on Sunday, Greek Deputy Prime Minister Theodore Pangalos said he believed the first vote would pass, but he said there may be more problems about the second implementation bill.

“That’s where we may have problems,” he said. “I don’t know whether some of our legislators will vote against it.”

However, on Sunday, two of the three possible rebels hinted they could be willing to support it, provided they received assurances from the government.

“I have submitted a 16-point paper to Venizelos ... and I expect specific answers, on which [my stance] will depend,” rebel lawmaker Panagiotis Kouroublis told state radio NET.

Meanwhile, French banks have agreed to roll over holdings of Greek debt for 30 years, French President Nicolas Sarkozy said yesterday.

With financial markets watching the Greek crisis anxiously, Sarkozy told a news conference in Paris that the French authorities had reached an agreement with the banks on a voluntary rollover of maturing bonds.

“We concluded that by stretching out the loans over 30 years, putting [interest rates] at the level of European loans, plus a premium indexed to future Greek growth, that would be a system that each country could find attractive,” he said.

Banking sources said banks would reinvest 70 percent of the proceeds when Greek bonds fall due. Of that amount, 50 percent would go into the new 30-year bonds and 20 percent would be reinvested in a zero-coupon guaranteed fund based on high-quality securities.

EU officials were discussing the French idea with international bankers and the Institute of International Finance (IIF) in Rome yesterday, euro zone sources said, and German banks voiced interest in the “French model.”

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