June 22, 2012 / 10:55 AM / 8 years ago

Greek bailout wish-list sets up showdown with Europe

ATHENS (Reuters) - Greece’s new government promised on Thursday to renegotiate the terms of the country’s bailout without endangering its future in the euro, responding to intense pressure to ease mounting social tensions but also risking a showdown with European powers.

A general view of the first cabinet meeting of Greece's new coalition government in Athens June 21, 2012. REUTERS/Yorgos Karahalis

The three-party coalition called for changes to the deal that is helping Greece avoid bankruptcy after the announcement of an 18-member cabinet dominated by the conservative New Democracy party of Prime Minister Antonis Samaras.

National Bank Chairman Vassilis Rapanos was named finance minister and New Democracy deputy leader Dimitris Avramopoulos became foreign minister.

Once jailed for fighting Greece’s 1967-74 military dictatorship, Rapanos must now cure its sick public finances while negotiating with euro zone leaders who are losing patience with Athens after two multi-billion euro bailouts since 2010 that have failed to end the crisis.

“The unity government’s goal is to tackle the crisis, open the road to growth and revise terms of the bailout without putting at risk the country’s European course, nor its euro zone membership,” said a policy document endorsed by the coalition.

Samaras, 61, was sworn in on Wednesday after elections last Sunday ended weeks of uncertainty that rattled financial markets and threatened to push Greece out of the euro zone.

At his first cabinet meeting, the Harvard-educated economist said his ministers would take a 30 percent pay cut and told them to use government cars as little as possible in an effort to lead the debt-laden nation by example.

“This government has no honeymoon period,” he said. “Make no mistake, our goal is to pull the country out of the crisis.”

New Democracy narrowly defeated the radical leftist Syriza bloc, which wants to tear up the latest 130 billion euro bailout deal and blames its demands for austerity for driving the country ever deeper into recession.

Samaras said ditching the bailout would mean returning to the drachma, Greece’s former national currency, and campaigned on a promise to ease the suffering of Greeks by renegotiating the terms to promote economic growth and jobs.

The coalition’s platform particularly challenges euro zone paymaster Germany, which has offered to adjust the lifeline’s terms to make up for time lost on two Greek elections since May, but refuses to revise it radically.

According to a party official involved in the coalition talks, the platform includes a two-year extension to the 2014 deadline for Greece to cut its budget deficit to 2.1 percent of national economic output from 9.3 percent in 2011.

Greek officials have said the extension would require an extra 16-20 billion euros in foreign funding.


The government will also seek to extend the payment of unemployment benefits to two years from one, to offer benefits to the self-employed without work and to limit public sector lay-offs, the official told Reuters. Lenders want the public sector payroll cut by 150,000, mainly through retirements.

Greece faces running out of cash next month without the next installment of funding, which must be approved by “troika” officials from the European Commission, European Central Bank and International Monetary Fund.

European Commission President Jose Manuel Barroso said the troika would visit Athens in the next few days “to exchange views with the new government and to begin to assess what has been done and what still needs to be done”.

The Democratic Left, a small leftist member of the coalition, said it expected flexibility.

“The troika mainly wanted Greece to have a cohesive, viable government that is widely accepted,” party spokesman Andreas Papadopoulos told NET radio. “We think that if the troika sees that such a government is in place, it will change its stance on a number of critical issues.”

Euro zone officials have said some adjustments are likely to a program that has slipped behind target in the weeks of political paralysis since a first election on May 6 and a deeper than expected recession.

German Chancellor Angela Merkel warned this week there would be no wholesale renegotiation.

The government brings together New Democracy and the Socialist PASOK party in an alliance of arch rivals who have alternated in power since the military junta fell.


Analysts doubt the government of unlikely allies, who have no history of cooperation apart from in a short-lived national unity government until earlier this year, can survive long. It has the daunting task of imposing the bailout’s terms on a society enduring a fifth year of economic suffering, worsened by the pay, pension and job cuts imposed by lenders.

Ominously, the cabinet lacks any senior members of the two junior coalition partners, signaling reluctant support for the new government. Of the 18 ministers, 13 are from New Democracy and one from PASOK. Four members of the cabinet, which is due to be sworn in at 7 p.m. (1600 GMT), are technocrats.

Euro zone countries remain suspicious of Harvard-educated economist Samaras, a career politician who switched from opposing the first bailout in 2010 when PASOK was in power, to cautious endorsement of the second when the socialist government began to unravel. Critics see him as an opportunist who frequently changes his stance.

Syriza, which came a strong second in Sunday’s election - a re-run of the May 6 vote that produced stalemate - will keep the government under constant pressure.

The streets of Athens are scarred by repeated violent protests against the austerity program. Almost a quarter of the Greek workforce is now jobless and living standards have plummeted. ($1 = 0.7873 euros)

Additional reporting by George Georgiopoulos, Renee Maltezou and Karolina Tagaris; Writing by Matt Robinson; Editing by Barry Moody and David Stamp

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