Greek Premier Defends Bailout Deal, Painful Cuts

Published February 11, 2012 11:18PM (EST)

ATHENS, Greece (AP) — Warning of a "catastrophe" that would leave Greeks subsisting on food stamps and the country wallowing in bankruptcy, Greek leaders urged lawmakers Saturday to pass more painful spending cuts on the eve of a crucial vote to qualify for a massive bailout.

In a televised address Saturday, Prime Minister Lucas Papademos defended the thousands of job cuts, drop in the minimum wage and other austerity measures that would earn the country a euro130 billion ($171.6 billion) bailout deal and stave off bankruptcy.

"The deal will ensure our country's future inside the euro. ... A bankruptcy would lead to uncontrollable economic chaos and social explosion," Papademos said. He added that a bankruptcy would lead to Greeks losing their savings; the state being unable to pay salaries and pensions; and shortages in import items such as medicines, fuel and machinery.

He and the leaders of parties backing Greece's coalition government — socialist George Papandreou and conservative Antonis Samaras — as well as Finance Minister Evangelos Venizelos, a socialist — used stark images of a country under bankruptcy to convince the public and, more importantly, persuade Parliament members debating the measures to vote for the deal.

"If we do not dare today, we will live a catastrophe," Papandreou said during a parliamentary debate session.

"What do you want, a country where food will be handed out with food stamps and where we will have no fuel?" Samaras angrily told a dissenting deputy.

"The battle is now. The war is now. If we falter, nothing will be left standing...The real dilemma is between painful measures and crushingly painful ones," Venizelos told socialist lawmakers.

Several dissident lawmakers were unconvinced. At least 13 conservatives and seven socialists declared they would not vote and two more socialist deputies resigned, bringing the total to three. Their replacements will be seated Sunday.

Typical of the dissidents' arguments was the one put forward by veteran socialist Vasso Papandreou (no relation to the socialist leader), a former minister and member of the European Commission. "If we say we do not pay the bond that matures on March 20, all (Europeans) will rush to find a solution," she said.

Debt-stricken Greece does not have the money to cover a euro14.5 billion bond repayment on March 20, and must reach a vital debt-relief deal with private bond investors before then. The country's woes have threatened its future in the 17-country zone that uses the euro currency.

The Europeans are waiting to see Greece finally act on their commitments.

"If the right course is now set sustainably in Athens, Greece can count on our support — but only then," German Foreign Minister Guido Westerwelle was quoted as telling the weekly Der Spiegel.

"There can no longer be advance payments," he said, according to the report. "Only actions count now."

Westerwelle said that the "clear aim" is to keep Greece in the eurozone. But he insisted that "it is not enough to approve reform programs; it is necessary to begin the implementation of the reforms without delay. Not sometime, but now."

The austerity measures included in the bailout deal, including the layoffs of 15,000 workers and a 22 percent drop in the minimum wage and pension cuts, have set off street protests and led to the resignations of half a dozen Cabinet officials.

Lawmakers are wary of voting for the measures and the prospect of more to come, along with the job cuts and the shutdown of several state agencies, including welfare agencies. The demands of creditors, including the European Union and the International Monetary Fund, have caused one of the original coalition parties — the populist right-wing Popular Orthodox Party — to quit the government and withdraw its four members from the cabinet. Two more cabinet members, both socialist deputy ministers, have also quit. They cited their disagreements with parts of the austerity package.

Both Papandreou and Samaras made it clear that dissenters are not welcome in the party. Samaras threatened to expel those who did not vote in favor and exclude them from the lists of party candidates in the next election. "I want to make it absolutely clear ... rebels or 'bravehearts' have no place in (the party's) candidate lists," he said.

"I call on you to fall in line and vote for this difficult and painful deal that will help (the country) stand on its feet. Whoever has a conscience problem can resign," Papandreou told his lawmakers.

Together, the socialists and the conservatives have 236 deputies in the 300-member parliament.

Parliament will vote Sunday on emergency legislation approving the new bailout and a debt-swapping deal with private creditors. Further legislation detailing the measures demanded by, and agreed with, Greece's public creditors, the EU and the IMF, will be up for vote a few days later. The exact time has not yet been set.

Samaras also called for an immediate election once the bond swap deal with Greece's private creditors is over, saying he would not agree to the extension of the mandate of the coalition government beyond that date. Elections are normally due in October 2013. The bond swap deal with Greece's private creditors is expected to help Greece get rid of some euro100 billion of its debt. The bond swap must be completed before March 20, the redemption date for euro14.5 billion worth of bonds. Elections could then be held about three weeks later than that, at the earliest.

While the two parties met, union leaders staged a demonstration outside Parliament that attracted about 4,000 protesters, while up to 6,000 policemen patrolled the streets of Athens. The protest ended with some scuffles that left two people injured when police tried to clear the street in front of Parliament. Authorities are bracing for a much larger, and possibly violent, one on Sunday evening.

Another 4,000 turned out for a peaceful demonstration in Thessaloniki, Greece's second-largest city.


Costas Kantouris in Thessaloniki and Geir Moulson in Berlin contributed to this report.

By Salon Staff

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