Tags: EU | Greece | Economic | Woes

Greek Premier Seeks Opposition Backing on Deficit

Tuesday, 15 Dec 2009 07:19 AM

Greece's new prime minister engaged opposition party leaders in rare crisis talks on the troubled economy Tuesday, a day after he announced a raft of spending cuts during a speech in which he warned the country risks drowning in debt.

Socialist George Papandreou was meeting with leaders of parties ranging from the Conservatives to the Communists, to seek support for measures designed to pull Greece out of its worst debt crisis in decades. The country's president is to chair the meetings.

But opposition parties appeared unimpressed.

"What is he asking us to support? His generalities? His delays?" questioned Antonis Samaras, the conservative opposition leader during a speech to his party deputies earlier Tuesday. "His delays have already been punished by the markets. If this attitude of indecisiveness continues it will be catastrophic for the Greek economy and for the country."

Left wing-backed trade unions were also unconvinced, with one reiterating a call for a nationwide strike on Thursday.

"There will no truce, no truce in fighting for the rights of the workers," said Giorgos Skiadiotis, spokesman for Communist-backed trade union PAME which organized a rally of about 100 people outside the Finance Ministry Tuesday morning.

Market reaction in Greece was lukewarm. The Athens Stock Exchange was about 1.1 percent down in midday trading Tuesday following Papandreou's speech Monday night, while the cost of insuring Greek sovereign debt rose further.

"I think they've still got problems and it will be very difficult given the political and social discontent in Greece to implement stringent budget cuts," said Neil Mackinnon, global strategist at VTB Capital. "The theme of sovereign credit risk is not going to go away."

Earlier, Moody's Investor Services, which has put Greece on warning for a possible credit rating downgrade, said 2010 would likely be a "tumultuous" year for sovereign risk. Moody's is expected to complete its current assessment of Greece's rating by early next year.

Athens has come under pressure from the European Union to straighten out its finances and obey deficit limits intended to support the shared euro currency. Its deficit spending is projected to reach 12.7 percent of economic output in 2009 — four times higher than the EU's 3 percent limit for countries using the euro.

Papandreou promised to bring the deficit down to below 3 percent by the end of 2013, and pledged that Greece's debt, which has soared to a staggering 300 billion euros ($442 billion), will begin to be reduced by 2012 at the latest.

"The 2010 budget, which is being discussed in the Greek Parliament, and Mr Papandreou's statement, are steps in the right direction," said Joaquin Almunia, European Commissioner for Economic and Monetary Affairs.

But he said Brussels wanted to see "concrete measures that will strengthen fiscal adjustment in 2010 and ensure a fast consolidation of public finances" when Greece sets out its plans for the Stability Program — the EU's review of euro-zone countries' budgets.

"We will continue to monitor the macroeconomic and fiscal situation and the implementation of the measures," he said.

Speaking to union and business leaders Monday night, Papandreou announced measures including slashing public sector bonuses, caps on salaries for public utility directors, defense spending cuts and eliminating cost-of-living increases for state employees with salaries of more than 2,000 euros ($3,000). Social security and government operating expenditures will be cut by 10 percent each, while the prime minister said the salaries of ministers and deputies, as well as his own, would also be curtailed.

He also called for taxes of up to 90 percent on large bonuses for private bankers, the introduction of a capital gains tax and the resumption of inheritance and property taxes abolished by the previous government.

But some said Papandreou's speech was short on details.

"Announcements with uncertain results," headlined the respected daily broadsheet Kathimerini, noting that the prime minister had reiterated his government's positions and had been short on specifics as to how he will pull Greece out of the crisis.

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Greece's new prime minister engaged opposition party leaders in rare crisis talks on the troubled economy Tuesday, a day after he announced a raft of spending cuts during a speech in which he warned the country risks drowning in debt.Socialist George Papandreou was meeting...
EU,Greece,Economic,Woes
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2009-19-15
Tuesday, 15 Dec 2009 07:19 AM
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