Greek parliament votes in favor of new Papandreou cabinet as debt crisis deepens

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Thursday, June 23, 2011

Euro bank notes.
Image: Andrew Netzler.

Greek Prime Minister George Papandreou survived a confidence vote by the Greek parliament late Tuesday night, thus allowing Papandreou to form a new cabinet constituted to address Greece's severe financial debt crisis. The vote's outcome is viewed as a measure of confidence in the government's ability to resolve the problems of the deeply-indebted nation and implement the stringent austerity measures necessary for Greece to receive future bailout packages from the European Union (EU).

Papandreou managed to face down internal dissent within his own Panhellenic Socialist Movement over the extremely unpopular austerity measures (he has said the measures are an issue of "life or death") and the final vote of 155 to 143, with two abstentions, matched Papandreou's 155 seats. Meanwhile, Greeks were angrily demonstrating against the measures outside, throwing bottles at the parliament building as riot police stood by.

Following the confidence vote, Greece will be in a position to look for further financial aid from the EU to avoid defaulting on its enormous debt, but help from the EU is dependent on the real work that must be done first: the Greek parliament's implementation of the hugely unpopular austerity measures.

Government spokesman Elias Mossialos said in an interview with Skai Television before the vote that Greece will be unable to pay wages and pensions after July 15 if the government does not secure the EU financing.

Cquote1.svg Nothing has been done to enhance growth. No single [Greek] indicator has shown strength. Cquote2.svg

—Mohamed El-Erian, chief executive of Pimco

The vote came in the midst weeks of widespread anti-austerity protests and strikes in major cities throughout Greece, involving clashes between police and demonstrators angry with the proposed slew of layoffs in the public sector which are to accompany the Socialist cabinet's program.

On Wednesday, Pimco, the biggest bond fund in the world, said it was unimpressed with Tuesday's vote of confidence, saying it believes Greece and perhaps other European economies will ultimately default on their debts. Mohamed El-Erian, chief executive of Pimco, said, "Nothing has been done to enhance growth. No single (Greek) indicator has shown strength."

Cquote1.svg We have a unique opportunity [to change the country]. If we falter, if we lose heart and squander it... history will judge us very harshly. Cquote2.svg

—Prime Minister George Papandreou

"For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default," said Mohamed El-Erian in a video conference.

The euro fell against the dollar on Wednesday as financial markets indicated that the eurozone debt crisis is far from over.

George Papandreou gave an emotional speech to parliament on Wednesday, saying "We have a unique opportunity (to change the country). If we falter, if we lose heart and squander it... history will judge us very harshly."

Meanwhile, when the new austerity measures move to parliament for a vote, Greece's major unions are planning to hold a 48-hour general strike.


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