Greek government reshuffles to push austerity plan
Greek Prime Minister George Papandreou is planning to form a new cabinet and seek a vote of confidence from his fractious Socialist party to try to push through an austerity package and avoid default.
Papandreou must pass the new 5-year campaign of tax rises, spending cuts and sell-offs of state property to receive a new EU/IMF bailout and a 12 billion euro aid tranche that Athens needs to pay back debt that matures in August.
Papandreou may seek to replace his finance minister, George Papaconstantinou, the main architect of hugely unpopular budget cuts demanded by the EU and the IMF as part of Greece’s €110bn (£96.7bn) bailout last year.
The reshuffle underscores the tenuous political and popular support for the new deal, but analysts say Greece has no choice but to carry on with the austerity measures or face default.
“If Papandreou gets the vote of confidence we will not go to elections and the chances that the mid-term plan passes will increase,” Theodore Couloumbis of the ELIAMEP think tank said.
Nonetheless, world stocks and the euro slumped late yesterday as the upheaval fed fears of a default. They fell further in Asia on Thursday after a Dutch newspaper quoted ECB policymaker Nout Wellink calling for a doubling of the European bailout fund.
He said the fund should be increased to €1.5 trillion if politicians want private-sector investors to participate in a second bailout of Greece.
Papandreou had initially offered to step down and form a unity government with opposition parties, but he abandoned the idea after the conservative New Democracy demanded Athens renegotiate its year-old international bailout.