Greece’s new coalition head must battle crippling debt

Former European Central Bank vice-president Lucas Papademos will head Greece’s new crisis coalition, the president’s office said on Thursday, ending suspense over who will try to save the country from default, bankruptcy and an exit from the eurozone.

The coalition will be sworn in at 12pm GMT on Friday, a presidential official said after Papademos struck a deal on the national unity government with outgoing Prime Minister George Papandreou and the opposition leader.

“The Greek economy is facing huge problems despite the efforts undertaken,” Papademos said as he emerged from the talks brokered by President Karolos Papoulias.

“The choices we make will be decisive for the Greek people. The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence.”

Papademos, a respected figure in European capitals and on financial markets, said the coalition had the specific task of implementing a €130-billion bailout deal with the eurozone before calling an early election.

Calm during the storm
He cuts a grey and uncharismatic figure in the colourful and chaotic world of Greek politics but also has a reputation for being calm at a time when the nation is clamouring for stability.

“He’s a clear policy thinker. He was never involved in politics. He knows what needs to be done,” said Thanos Papasavvas, head of currency management at Investec Asset Management in London.

The deal was struck after often chaotic negotiations among the party leaders, producing one deal to install the speaker of Parliament as premier that collapsed before it had been sealed.

“After days of farcical comedy, Greece has today a prime minister who is fully qualified to succeed in the task he has been assigned to,” said Costas Panagopoulos, head of pollsters Alco.

“The fact that the parties finally managed to cooperate is also very positive. I hope that the big gap between political parties and Greek citizens will now start shrinking.”

Daunting problems
In a sign of the daunting problems he will face, the statistics service ELSTAT reported that unemployment jumped to a record high of 18.4% in August — at the height of the tourism season when the rate traditionally falls — from 16.5% in July.

Papademos said he had set no terms to any political leaders before accepting the job but government sources said he had driven a hard bargain.

These included a demand that both Papandreou’s socialist PASOK and the New Democracy Party of Antonis Samaras give a written undertaking to support the eurozone bailout package, which stipulates austerity measures which are likely to be highly unpopular with Greek voters.

EU economic and monetary affairs commissioner Olli Rehn, exasperated by broken Greek promises, has already insisted the leaders sign up before receiving even an €8-billion instalment from Greece’s original bailout deal pulled together last year.

Unless Greece gets that money, it will default next month when big debt repayments come due. However, Germany and France have made clear they will not compromise the eurozone’s stability for the sake of Greece and told the nation that it must decide whether it wants to stay in the bloc or not.

The last days of Pompeii
Meanwhile, media and other politicians finally lost patience with their squabbling leaders.

Leftist Syriza leader Alexis Tsipras said: “What we are witnessing looks like the last days of Pompeii. Elections are needed right now.”

Summing up the frustration of a nation, the leading Ta Nea wrote in its online edition: “Shipwreck at the presidential palace.”

Whoever finally wins the job faces a mountainous to-do list.

His first job will be to persuade the EU and International Monetary Fund to disburse an €8-billion slice of aid from a 2010 bailout deal that is desperately needed by December 15 before the coffers run dry.

Then he must force through painful austerity measures exacted as the price for a second EU bailout package which gives Athens €100-billion in loans, the same amount in debt reduction and a further €30-billion in guarantees.

Drawing a firm line in the sand, crisis-weary France and Germany last week gave Athens a stark choice: pass these belt-tightening measures or leave the euro.

The new premier must also bring together Greece’s warring politicians for a unity administration in a country used to adversarial politics — combat rather than compromise — ahead of elections provisionally set for February.

‘The world will not wait’
An early sign of trouble was opposition leader Antonis Samaras’s refusal to sign an agreement promising to implement austerity measures, as demanded by the EU, saying it offended Greece’s dignity.

Late on Wednesday Samaras denied he was the one holding up progress.

“My problem does not lie with particular people. My problem is to unblock the sixth tranche and the bailout deal, for the country to have a government, so we can reach elections where the people can speak,” he told reporters.

Polls show that Samaras’s New Democracy party is about 10 points ahead of the socialist Pasok party, which will have to find a new leader for the election campaign.

With Greece’s troubles adding to the headache for EU leaders who already have their hands more than full with political instability in Italy and record bond yields, Germany’s leader urged Europe to put its money where its mouth is.

“Europe is in crisis,” Chancellor Angela Merkel said.

“The world will not wait for Europe.” –AFP, Reuters

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