Greek rebel MPs may curb austerity reforms: deputy PM

ATHENS Sun Jun 26, 2011 6:41pm EDT

1 of 4. Protesters gather in front of the parliament during a rally against the austerity economic measures and corruption at Syntagma (Constitution) square in Athens June 26, 2011.

Credit: Reuters/John Kolesidis

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ATHENS (Reuters) - Greece's deputy prime minister warned on Sunday that rebel lawmakers may block some reforms sought by international lenders but parliament would probably back an overall austerity package this week to avert a sovereign default.

Despite stern warnings from senior European Union politicians, Greece's conservative opposition continued to defy calls for national unity to pass the vital legislation, keeping up the pressure on Socialist Prime Minister George Papandreou.

Parliament is due to start debating on Monday the programme of tax increases and spending cuts worth 28 billion euros ($40 billion) over five years.

Papandreou needs parliament's approval this week to secure the payment of the next 12 billion euro installment of an EU/IMF bailout, vital if Greece is to avoid becoming the first euro zone nation to default on its debt next month.

European officials want private creditors to participate with a "voluntary" rollover of Greek debt avoid a default which would send shockwaves through the global financial system. Much of the debt is held by French and German banks.

A French banking source, confirming a report in Le Figaro newspaper, said on Sunday that France's government and banks had agreed on a rollover proposal. Creditors would reinvest 70 percent of the proceeds from Greek debt, receiving new bonds with longer maturities and shares in a zero coupon fund.

Deputy Prime Minister Theodore Pangalos told Spain's El Mundo newspaper he was optimistic about overcoming discontent in his party to win the first round of voting on Wednesday, on tax and spending targets and creating a privatization agency.

"The package of short- and medium-term measures with which we basically hope to establish the framework to undertake reforms will be approved without difficulty," Pangalos told the newspaper in an interview.

He was more cautious about whether the government could push through legislation a day later on specific budget measures and privatization of specific state assets.

"That's where we may have problems. I don't know whether some of our legislators will vote against it. It's possible."

With Greece unable to return to international bond markets next year, as foreseen under current 110 billion euro EU/IMF programme, European leaders are working on a second bailout of a similar size, including a contribution from private sector banks which would agree to a "voluntary" rollover of their Greek debt.


Many Greeks who have lost jobs or seen their real income decline by nearly one-fifth over the last two years have reacted angrily at the prospect of new measures they say fail to target wealthy tax evaders and corrupt politicians responsible for Greece's debt spiral.

With government lawmakers reluctant to support more austerity in the face of public outcry, Papandreou's PASOK party has seen its slender majority whittled down by five defections over the last 13 months, leaving it with 155 seats in the 300-member parliament.

In a rare piece of good news for Papandreou, one of two PASOK legislators who announced they would vote against the package appeared to be wavering on Sunday after holding talks with Finance Minister Evangelos Venizelos at the weekend.

"One moment I veer toward a 'no', the other toward a 'yes'. I will make a last-minute-decision," Thomas Robopoulos told Reuters. A third Socialist MP has said he will support the deal only if Venizelos gives him assurances on certain measures.

Ramping up pressure on the government, unions have called a two-day national strike from Tuesday. Many companies, including the main electricity group PPC which is slated for partial privatization next year, have started rolling stoppages.

Pangalos, who after a cabinet reshuffle this month shares his deputy premier's title with Venizelos, said he believed the conservative opposition would vote in favor of some measures.

But New Democracy leader Antonis Samaras turned a deaf ear to the appeals from home and abroad to support the package, saying the painful measures would only deepen Greece's worst recession in 37 year.

"You can't ask for more taxes in an already overtaxed country, in a market that has been sucked dry, with economic activity at zero and a huge recession," he said in a statement.

In recent days, European leaders have added their voices to calls from Greek ministers to approve the measures and avoid a default.

"The stability of the entire euro zone would be in danger and we would need to quickly ensure that the risk of contagion for the financial system and other euro area countries would be contained," German Finance Minister Wolfgang Schaeuble told German Sunday newspaper Bild am Sonntag.

Venizelos, who took over the finance portfolio in last week's reshuffle, clinched the agreement of EU and IMF inspectors on Thursday to additional measures which he hopes can put government finances back on an even keel after it failed to meet targets under its international programme.

The steps include a one-off solidarity levy on income, a rise in heating fuel tax and lowering the tax free income allowance to 8,000 euros a year from 12,000.

A peaceful crowd of around 1,000 people gathered on Sunday in Syntagma square outside parliament, which was protected by a line of riot police.

With youth unemployment running at around 40 percent, many of those who have taken to the streets in protest or camped in Syntagma over the last month are young people who fear the measures will worsen their dim economic prospects.

"The choice is not between voting for the measures or defaulting, but between economic and social bankruptcy on the one hand and growth and social cohesion on the other," said the Left Coalition, a small opposition party, in a statement.

(Additional reporting by Tracy Rucinski in Madrid and James Regan in Paris; Editing by Peter Graff)

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Comments (11)
JamVee wrote:
Massive overspending on social programs; years of capitulation to union labor’s unreasonable demands; mind bending corruption at every level; and tax evasion on a grand scale.

Stand back, we are about to witness Greece “cut off its nose to spite its face”. If they reject the necessary austerity measures, they will multiply their own economic suffering by a factor of 10.

Jun 26, 2011 11:16am EDT  --  Report as abuse
Eric93 wrote:
The Greeks need to reject these control measures and let the cards fall where they may if they want to regain their sovereignty. They need a new ‘Lord Byron’ to lead them in battle against the fascist control of the neo-Ottoman Empire of Brussels. It only wants CONTROL. It wants to de-racinate the Greeks (and Portuguese and others) and turn them into sheeple which can be easily led as an amorphous mass where the RULERS want them to go: into a post nationalistic world of Multi-Culti Diversity where no-one can remember their own ethnic roots. Once Greece defaults it too, like Russia and Argentina will then sort things out in its own way as a SOVEREIGN nation. The battle cry should again be Elefteria! (freedom, liberty, sovereignty).

Jun 26, 2011 11:32am EDT  --  Report as abuse
Joedoright wrote:
You got it wrong, JamVee. Greeks are smart. Why are the crooks that got them into this mess, including Wall Street people , NOT BEING PROSECUTED ? The International Banks want to suck the Greeks dry .Same problem with $14 .5 Trillion in the U.S.
This is what Alan Greenspan said in 1967 before he got aboard the GRAVY TRAIN :”Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process.It stands as a protector of property rights “. The government in Greece and the U.S. is on the way to rob people of those rights. THAT IS WHY THE GREEKS ARE REVOLTING !

Jun 26, 2011 11:46am EDT  --  Report as abuse
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