Greece warns bailout rebels of disaster

ATHENS Sat Feb 11, 2012 4:07pm EST

1 of 10. Medics try to help an anti-austerity protester, who lies unconscious after he was injured by police, in front of the parliament in Athens February 11, 2012, during a demonstration on the second day of a 48-hour strike by Greek workers unions.

Credit: Reuters/Yannis Behrakis

Related Topics

Photo

MH17 crash site

The aftermath of the Malaysian airliner crash.  Slideshow 

ATHENS (Reuters) - Greek Prime Minister Lucas Papademos told lawmakers to back a deeply unpopular EU/IMF rescue in a vote on Sunday or condemn the country to a "vortex" of recession.

He spoke in a televised address to the nation, ahead of Sunday's vote on 3.3 billion euros ($4.35 billions) in wage, pension and job cuts as the price of a 130-billion-euro bailout from the European Union and International Monetary Fund.

The effort to ease Greece's huge debt burden has brought thousands into the streets in protest, and there were signs on Saturday of a small rebellion among lawmakers uneasy with the extent of the cuts.

Papademos said parliament had a historic responsibility to back the bill, or face catastrophic consequences if Greece misses a March 20 deadline to service its debt.

"A disorderly default would set the country on a disastrous adventure," he said. "It would create conditions of uncontrolled economic chaos and social explosion."

"The country would be drawn into a vortex of recession, instability, unemployment and protracted misery and this would sooner or later lead the country out of the euro."

Parliament's finance committee approved the bill on Saturday, and a full vote in the chamber is expected late on Sunday.

The Papademos coalition has a huge majority, which should ensure parliament approves the package needed to secure Greece's second bailout since 2010.

But the number of dissenters is growing.

About 20 MPs belonging to the two major parties backing Papademos shrugged off threats from party leaders and warned they might reject the bailout. It would take more than 80 rebels to scupper the law.

Six members of the Papademos cabinet have already resigned.

INCALCULABLE CONSEQUENCES

In an interview with the newspaper Imerisia, Deputy Finance Minister Filippos Sachinidis described the catastrophe he believes Greece would suffer if it failed to meet debt repayments of 14.5 billion euros due next month.

"Let's just ask ourselves what it would mean for the country to lose its banking system, to be cut off from imports of raw materials, pharmaceuticals, fuel, basic foodstuffs and technology," he said.

On the second day of a 48-hour protest strike, about 50 Communist party activists draped two large banners on the ramparts of the Acropolis on Saturday, reading: "Down with the dictatorship of the monopolies (and the) European Union."

About 7,000 protesters gathered in Athens, police said, but there was no repeat of the teargas and petrol bombs of Friday.

Members of the conservative New Democracy party, which has a big lead in opinion polls before elections possible in April, are likely to back the deal solidly. Around 10 have threatened not to.

"This is obviously an issue of party discipline," party leader Antonis Samaras told his lawmakers in parliament, warning anyone who voted 'No' "will not be a candidate in the next election."

Former Socialist Prime Minister George Papandreou, who negotiated the first bailout before his government collapsed in November, acknowledged the pressure.

"I've lost friends, my family suffered, I gave up my office, I was insulted, vilified, like no other politician ever was in this country," he told PASOK's parliamentary group.

"Still, all that is nothing compared with what our people will suffer if we fail to do the right thing."

Party discipline is much weaker at PASOK, whose support has dived to 8 percent in the latest opinion from the nearly 44 percent it commanded when Papandreou led it into power in 2009.

The deal includes a bond swap to ease Greece's debt burden by cutting the real value of private investors' bond holdings by some 70 percent.

FIFTEEN BILLION MORE?

The chief negotiator for private creditors in the debt swap deal, Charles Dallara, urged a 'Yes' vote, saying the deadlines allowed "no room for slippage."

In comments published on Saturday, Dallara, who is managing director of the International Institute of Finance (IIF), said private creditors were committed to a voluntary agreement and that he expected a "very high participation rate."

"It is important for lawmakers to understand what is at stake," Dallara told Kathimerini newspaper.

Lawmakers need to approve the deal by Sunday, otherwise the country will not make a February 17 deadline to submit the debt swap offer to its private-sector bondholders, Finance Minister Evangelos Venizelos said on Saturday.

Euro zone finance ministers have told Greece that by then it must also explain how 325 million euros ($430 million) out of this year's total budget cuts will be achieved before it agrees to the bailout.

Bailout documents released on Friday left blank the amount of the rescue. Venizelos said 15 billion euros more might be needed to rescue the country's banks, confirming estimates from EU officials.

The EU and IMF have been exasperated by a series of broken promises and weeks of wrangling over the bailout. They will not release the aid without clear commitments by the main party leaders that reforms will be implemented, whoever is in power.

The uncertainty has upset world financial markets, with stocks snapping a five-day winning streak on Friday and the euro tumbling.

The bill, approved by the cabinet on Friday along with hundreds of pages of accompanying documents, sets out reforms including a 22 percent cut in the minimum wage, pension cuts worth 300 million euros this year, as well as health and defense spending cuts.

The government promised to speed up implementation of reforms in the labor, product and services markets, cut spending, and push through a privatization plan. ($1 = 0.7582 euros)

(Writing by David Stamp/Matt Robinson; Editing by Myra MacDonald)

FILED UNDER:
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (63)
NorthStarMan wrote:
I have read about as much as I can take of this drivel. The Greek people are not to blame for this mess. There are two classes whose behavior is nothing short of criminal; first successive Greek governments who have let their finances get into this mess, and secondly those Greeks who call them selves citizens but doge paying their fair share of taxes, they are nothing but parasites. The EU must bear some of the blame too, they bent the rules to admit Greece but who knows if denying them admittance would have stopped successive Greek administrations from their recklessness and negligence.

Feb 10, 2012 8:57pm EST  --  Report as abuse
Anthonykovic wrote:
Well, well. It’s time for Greeks and Greece to pay up, party over.
The hangover may be particularly miserable, but they have no one but themselves to blame.

The Greeks borrowed billions and billions to finance their follies, to have a standard of living much higher than what they earned and what they rightfully deserved.

Feb 10, 2012 8:58pm EST  --  Report as abuse
Crash866 wrote:
Protesters…the way of the future…

Feb 10, 2012 9:05pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.