Further turmoil shows that the titanic effort to prop up Greece is listing dangerously, writes ARTHUR BEESLEY, European Correspondent, in Athens
ATHENS IS abuzz with rumour and speculation after a group of government MPs challenged Socialist premier George Papandreou not to put his new austerity plan to a single vote in parliament. Whether this ends in tears remains to be seen, but the move does not augur well for looming talks on a second bailout plan for the country.
Papandreou is on the cusp of a difficult agreement with the EU/IMF “troika” to release the next €12 billion for the Greek bailout.
The deal, expected today, will trim more than €6 billion from this year’s budget while setting out further medium-term measures and a swingeing privatisation plan. The objective is to ensure compliance with the country’s original bailout terms.
These cuts, still subject to the approval of MPs, are deeply unpopular with Greeks. Riot police were deployed outside parliament yesterday as demonstrators gathered for a ninth successive night of protest.
However, the pact with the “troika” resolves but the smaller question over the Greek financial outlook. Still to come is the negotiation of an aid plan to get the country through another funding crunch next year, a prospect which appals Germany and other northern European countries.
Into this unpredictable maelstrom came an abrupt intervention yesterday when 16 MPs in Papandreou’s Pasok party wrote a letter calling for deeper political debate on the bailout.
“It is not just a matter of political responsibility, logic demands that we take stock. It is a matter of patriotism and democracy,” they said. The letter caused a more than slight tremor in government circles as 15 of the signatories backed defence minister Evangelos Venizelos when he challenged Papandreou for the leadership of Pasok a few years back. The MPs are not threatening to vote down the latest cuts. But they made clear their concern at Papandreou’s declared plan to seek parliamentary approval for the entire package in a single swoop.
His intentions here are simple. He wants to eliminate straight away the risk of any individual measures falling by the way if MPs take fright. He faces further pressure here on two fronts: rising public resistance to the austerity drive; and deep euro zone scepticism about his power to execute the plan.
Pasok has 156 seats in the 300-seat parliament, so even the loss of six votes would be disastrous.
The MPs’ démarche is “the first breach in the government’s cohesion, just a few days before the government resumes negotiations and puts into vote the mid-term financial measures, privatisations and the emergency ones for 2011”, said Vassilis Nedos, a political correspondent with the Greek daily Kathimerini.
What is more, it only adds to European heat under Papandreou. He is due in Luxembourg today to meet prime minister Jean-Claude Juncker, president of the group of euro zone finance ministers.
The major issue in these talks is not the deal for the €12 billion, but a further intervention required next year in view of the country’s likely exclusion from private debt markets at that time.
This presents serious political difficulty in Berlin as chancellor Angela Merkel is under siege from bailout opponents in her own administration. Other European leaders face similar strain.
To appease domestic dissenters, they have already resolved to impose exceptionally tough policy conditionality on a new bailout to ensure the Greeks do the business. It already seems a given that the unfolding events in Athens will intensify the push for intrusive measures. That, in turn, will have political implications in Greece.
Papandreou was elected with 160 seats, but three MPs went offside when the EU/IMF deal was done 13 months ago. Another jumped in December. In spite of deep divisions over the bailout among his ministers, he has thus far held his majority together.
His next cabinet meeting is on Monday, with briefings for the Pasok parliamentary party later in the day. The test of his authority will be whether he can proceed with a single vote on the new measures.
Even if he does, the turmoil shows that the titanic effort to prop up Greece is listing dangerously. Dublin can only watch from the sidelines, mindful that the fate of Greece will bear down on the Irish bailout.