Comedy or ancient tragedy?

In News on June 16, 2011 at 12:22 pm

On 15 June, while the Greeks were demonstrating outside the parliament building and the police were releasing tear gas by the dozens in the streets of Athens, a peculiar play took place, with Prime Minister George Papandreou in the leading role.

At 1pm, he visited the President of the Republic, Karolos Papoulias to communicate to him the need for a “national unity” (or universal) government, which would be formed from representatives from all political parties and would thus have support across the political spectrum. Soon enough, he was in private talks on the phone with opposition leader Antonis Samaras. Allegedly, the Prime Minister also offered to step down himself, if this was what was needed to secure the consent for the “national unity” government. Mr Samaras was reported to have agreed in principle, on the condition that the medium-term programme (new austerity package) is renegotiated in Brussels.

Then, in the early evening Mr. Papandreou gave a national address, claiming that there will be no national unity government, as there were press leaks by the opposition during their private communication. He announced that he would be forming a new cabinet, which will be put to a vote of confidence in the parliament on Sunday, 19 June.

Presumably, what triggered Mr. Papandreou’s moves was the resignation of one of his MPs (George Lianis) on Tuesday. This decreased the majority he had in parliament (he now has the support of 155 MPs out of a total of 300) and increased fears that he might be facing revolt in his party over the austerity programme. These fears seem to be more real than not. As this piece is written, and according to the Greek media, the Parliamentary Group of the Socialist Party are convening. Some ministers are reported to call for the resignation of the Finance Minister George Papaconstantinou, while others go as far as to challenge the premiership of Mr. Papandreou. Announcements are expected to be made around 4pm (Greek time).

In the opposition camp and following the failed talks and in a predicted populist move, Mr Samaras has called for general elections. The New Democracy parliamentary group are expected to convene later on this evening.

At the same time, the Europeans are engaged in their own negotiations  on the Greek debt crisis. Having failed to agree on the specifics on the second bail-out package of Greece on Tuesday evening, the Eurozone ministers are closer on reaching an agreement today (16 June), according to the EU Observer and the Financial Times. The main point of disagreement is how private creditors will contribute to a new Greek bail-out. While Germany wants Greece’s lenders to swap their bonds for new ones with extended maturities, the European Central Bank, the Commission and France are against any move which may be interpreted by the markets as “non-voluntary”.

Meanwhile, the financial markets mirror the panic. On 13 June, Standard & Poor’s downgraded Greece’s rating from B to CCC. The new rating places Greece at the very bottom of the 131 states that have a sovereign debt-rating (lower than Pakistan, Ecuador or Jamaica. Following the street riots on 15 June, yields on Greece’s 10-year bonds reached a record high of 18.4%. This morning financial markets had fallen further as investors sold shares, amidst fears of Greece’s default. European markets opened lower, with London, Paris and Frankfurt initially down more than 1%.

It all has to be resolved as soon as possible, ahead of the Eurozone ministers’ next meeting on Sunday, 19 June, ahead of the European summit on 24 June and certainly before 29 June when the next IMF payment is due .

And there is no doubt this back-and-forth Greek drama politics is simply fuelling the overall uncertainty which surrounds the country’s future.


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