Business & Economy

Papandreou to present EU deal to wary Greeks

26 October, 2011

Greek Prime Minister George Papandreou will present to the nation on Thursday an EU deal to lower Greece's debt burden, amid rising frustration with his Socialist government and fears the agreement could spell years of painful belt-tightening.

Papandreou, speaking earlier in Brussels after marathon negotiations to clinch a 50 percent writedown of Greek debt, had hailed the agreement as finally making the debt burden sustainable and spelling a new dawn for his country.

In a bid to soothe concern among Greece's 11-million-strong population, a government spokesman said Papandreou would not unveil any further austerity steps because of the package. The prime minister is due to speak on television at 1700 GMT.

"There will be no new austerity measures based on the agreement that has been signed," Ilias Mosialos told state-owned NET TV.

On his return to Athens, Papandreou was first due to brief President Karolos Papoulias, before chairing a cabinet meeting and contacting leaders of opposition parties.

On the streets of Athens, Greeks tired of record unemployment and falling wages amid the worst recession since World War II poured scorn on the EU bailout, saying that it heralded a long period of more austerity.

"What rescue? Europe has betrayed us. Can't they see we've nothing left to give," said 85-year old George Kapsokalyvas, a public sector pensioner. "Only God can save us."

Without the 130 billion euros in fresh EU/IMF funding pledged under the Brussels agreement, plus the 100 billion euro reduction in its sovereign debt, Greece would face the prospect of becoming the first euro zone country to go bankcrupt.

Papandreou said Greece might be forced to temporarily nationalise some of its banks after the writedown on their bond holdings. The chairman of Greece's sixth largest lender ATEbank , Theodoros Pantalakis, estimated Greek banks would need some 27 billion euros in capital.


The leader of the main conservative opposition party New Democracy, who has consistently refused to back Papandreou's efforts to tackle the crisis, said control over policy was being passed to the European Union and International Monetary Fund.

"Our priority should be restablishing economic growth regain our national sovereignty," said Antonis Samaras, saying his party would continue to oppose the deal. "We have absolutely no right and no reason to give it up to anyone."

Samaras said there was no reason to celebrate that Greece's debt would fall to 120 percent of GDP by 2020, back to 2009 levels. The debt mountain is forecast to rise to about 160 percent of GDP this year.

A spokesman for the far-right LAOS party, Kostas Aivaliotis, branded the deal the climax of Greece's "national humiliation".

Ordinary Greeks also voiced resentment at the power wielded by EU/IMF inspectors, who are demanding liberalisation of Greece's highly regulated economy in return for the funds needed to stave off default.

"If these inspectors come here permanently, it will be an occupation without weapons," said Panagiotis Papadopoulos, 46, a workers at the state power corporation. "This government succumbed."

With Papandreou's Socialist party reduced to just 153 members in the 300-seat parliament, after expelling an MP who voted against labour reforms last week, expectations have risen that further belt-tightening could trigger snap elections.

"The truth is that it doesn't matter what Papandreou tells us tonight, many people don't trust him any more," said Costas Panagopoulos, head of ALCO pollsters.

"People believe that once again someone else has decided for him ... If the government is forced to bring more measures in the coming months, then they will be forced into elections."