Greece needs another €110bn bailout to avoid debt default, says Papandreou

Greek prime minister puts figure on new bailout needs for first time as he struggles to get country behind austerity measures Greece will need a second international financial bailout of the same magnitude as last year’s €110bn (£97bn) lifeline in order to avoid a tumultuous debt default, the prime minister, George Papandreou, has conceded while mounting a last-ditch appeal to parliament and the nation to back his austerity programme. Appealing for a vote of confidence in his newly reshuffled government, the Socialist party leader warned that without further aid from the EU and IMF, Athens’s cash reserves would soon run out, inviting a financial crisis that European officials have warned would rapidly contaminate the international financial system. “I ask for a vote of confidence because we are at a critical juncture,” said Papandreou in a speech opening a marathon parliamentary debate that culminates with the crucial vote on Tuesday. The sacrifices required for that aid – more cost-cutting, more tax increases, job losses and massive privatisations – were infinitely better than default, he said, as thousands of austerity-weary Greeks protested outside the 300-seat parliament. “The debt and deficits are national problems that have brought Greece into a state of [diminished sovereignty], one that may have protected us from bankruptcy, but which we need to get out of. The consequences of a violent bankruptcy, or exit from the euro, would be immediately catastrophic for households, the banks and the country’s credibility … the sacrifices people are making are paying off,” he said. It was the first time that Papandreou or any Greek official had broached the subject of how big the new bailout would be. The admission, after weeks of speculation over the size of the package, highlighted the parlous state of the country’s economy despite receiving regular cash injections from the €110bn rescue agreed last May, the biggest bailout in western history. Athens’s debt, which stood at €340bn in December, was estimated to have exceeded €355bn, the equivalent of 150% of GDP, in April. By comparison, the government’s annual income is almost one-tenth of that, at around €40bn. Papandreou called the vote after a first attempt to pass new austerity measures in return for the aid met with fierce opposition from his own Pasok party. After a flurry of defections and the collapse of talks aimed at forming a coalition government, he moved ahead with a radical reshuffle of his cabinet, appointing Evangelos Venizelos, a party heavyweight and political rival, as finance minister to navigate Greece through its worst crisis in modern times. A poll published in the To Vima newspaper showed that around 47% of Greeks are vehemently opposed to the new €28bn cost-cutting plan whose centrepiece is an ambitious privatisation drive that aims to raise an additional €50bn for the cash-strapped state by 2015. Before attending his first summit of eurozone finance ministers in Luxembourg where the details of a new three-year rescue deal for Greece were discussedon Sunday, Venizelos promised austerity measures will be meted out fairly. But public anger is still building on the street – tens of thousands of Greeks were expected last night to gather outside parliament in protest – and unions are preparing a storm of strikes. In an attempt to placate voters, who increasingly have come to identify Greece’s politicians with corruption, he pledged to call a referendum on changes to the “political system” later this year. Reforms would include an overhaul of the constitution and abolishing practices such as the immunity enjoyed by MPs, a source of the discontent that has prompted protestors to scream “thieves” outside parliament as the debt drama has unfolded. The conservative opposition leader, Antonis Samaras, called for Papandreou to step down to pave the way for elections and a renegotiation of the bailout. But Papandreou called for the opposition to “stop fighting in these critical times, stop sending the image that the country is being torn apart”. Greece Europe European debt crisis European banks European Central Bank Europe Euro Currencies Euro European Union Economics Helena Smith guardian.co.uk

Posted by on June 19, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.