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June 13, 2021

Cabinet reshuffle as Greece gets desperate

Eurozone finance ministers are to sign off on the payout of EUR 12 billion on Sunday and decide on a new bailout in July.

ATHENS – Greek Prime Minister George Papandreou was set to announce a new cabinet late last night in a concessionary move as he seeks support for new austerity measures. Papandreou, who will stay in his post, says he will put the cabinet to a vote of confidence in the parliament on Sunday, the BBC informs.

According to The New York Times, Papandreou was to hold an emergency session of the party’s parliamentary group at 4:30 p.m. local time, and people in the government said they still expected the prime minister to announce a cabinet reshuffle rather than a snap election later.

One of the legislators who quit suggested a snap election might be a solution to the crisis, but the other said such a course could be disastrous for the already beleaguered economy.

President Karolos Papoulias has urged Greek politicians in a statement not to make matters worse by turning the economic crisis into a political one. The proposed measures are necessary to gain EU and IMF aid, but have been met with fierce opposition in Greece. Athens witnessed some of the most violent protests in more than a year on Wednesday as demonstrators went on to the streets and took part in a general strike. On Thursday, Greek government MP George Floridis resigned in protest at the austerity plan. He was followed shortly afterwards by Ektoras Nasiokas, another Socialist MP. Earlier this week, another Socialist MP defected, leaving the party to sit as an independent. The resignations do not affect the party’s parliamentary majority as the seats are automatically allocated to the next Socialists in line. The IMF is expected to pay the next tranche of Greek aid of 12 bln euros on the basis of a promise of future EU funding rather than any concrete commitments, reports say. This would give the EU more time to finalise a package to help Greece. Eurozone finance ministers are to sign off on the payout on Sunday and decide on a new bailout in July, according to EU Economic and Monetary Affairs Commissioner Olli Rehn. He said Thursday that such a two-step approach “means that the funding of the Greek sovereign debt can now be ensured until September, while we take the decisions for the medium-term, beyond September, in July.”

Markets fall

Wednesday’s violent protests destabilised markets, with major indexes witnessing the biggest drop on since 1 June, and the euro sliding more than 1 per cent against the dollar. Yields on Greece’s 10-year bonds reached a record high of 18.4 per cent. The sell-off followed falls in Asian markets, with investors worried that the Greek economy has reached a tipping point and that contagion will spread. French and European Central Bank officials have warned that a restructuring of Greece’s 350 bln-euro debt as proposed by Germany could cause a default that would shake the whole eurozone. French President Nicolas Sarkozy on Thursday urged other European leaders to find a compromise on Greece’s debt crisis to stabilize the euro. Without stability, there would be no economic growth in the eurozone, he said.

France’s three biggest banks are at risk of a credit downgrade because of exposure to Greek debt.

EU commissioners are said to have a “profound sense of foreboding” about Greece and the future of the eurozone, according to leaked account of a meeting on Wednesday seen by the BBC.

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