Greece’s bailout rebels warned of the unknown

Greek leaders told a growing band of rebellious lawmakers yesterday to back a deeply unpopular European Union/International Monetary Fund (IMF) rescue in parliament or send the nation down “an unknown, dangerous path” to default, international economic isolation and a deeply devalued drachma. Conservative leader Antonis Samaras, who has attacked austerity policies for driving Greece ever deeper into recession, still told his party to back the 130bn euro deal or be dropped as candidates in the next general election. With voters deeply hostile to the bailout’s tough conditions, former socialist prime minister George Papandreou admitted that backing austerity had cost him the premiership and even some of his friends, but the alternative was a collapse in living standards and further “unforeseeable consequences”. The coalition of Prime Minister Lucas Papademos has a huge majority, which should ensure parliament approves today a package including a further 3.3bn euros in budget cuts this year, needed to secure Greece’s second bailout since 2010. But the number of dissenters is growing. About 20 MPs belonging to the two major parties backing Papademos shrugged off their leaders’ threats and warned that they might reject the bailout. However, it would take more than 80 rebels to scupper the law in a vote scheduled for late today. Six members of the Papademos cabinet have already resigned over the heavy pay, pension and job cuts which the EU and IMF are demanding as the price of the funds, which Greece needs by next month to avoid a messy bankruptcy. Officials hammered home the message that Greece’s future in the eurozone was at stake. “The consequences of disorderly default would be incalculable for the country – not just for the economy ... it will lead us onto an unknown, dangerous path,” Deputy Finance Minister Filippos Sachinidis said. In an interview with the newspaper Imerisia, he described the catastrophe he believes Greece would suffer if it failed to meet debt repayments of 14.5bn euros due on March 20. “Let’s just ask ourselves what it would mean for the country to lose its banking system, to be cut off from imports of raw materials, pharmaceuticals, fuel, basic foodstuffs and technology,” he said. Late on Friday the cabinet approved the draft bailout bill and a plan to ease the state’s huge debt burden which has deepened the nation’s political and social crisis and brought thousands out on the streets in protest. As a 48-hour protest strike went into its second day, about 50 Communist party activists draped two huge banners on the ramparts of the Acropolis yesterday, reading: “Down with the dictatorship of the monopolies (and the) European Union.” About 7,000 demonstrators gathered in central Athens, police said, but there was no repeat of trouble on Friday when police fired teargas at protesters throwing petrol bombs and stones. Members of the conservative New Democracy party, which has a big lead in opinion polls before elections expected as early as April, are likely to back the deal solidly. Samaras still warned his party, the second biggest in parliament, against stepping out of line. “This is obviously an issue of party discipline,” he told New Democracy lawmakers in parliament, warning anyone who opposed the bailout “will not be a candidate in the next election”. Six New Democracy deputies have threatened not to back the bill. The smallest party in the coalition, the far-right LAOS, quit the government in protest at the package on Friday, ordering its four cabinet members to resign. Two members of the Socialist PASOK party have also left the cabinet. Papandreou, who negotiated the first bailout before his government collapsed in November, acknowledged the huge pressure on any politician backing the second rescue. “I’ve lost friends, my family suffered, I gave up my office, I was insulted, vilified, like no other politician ever was in this country,” he told PASOK’s parliamentary group. “Still, all that is nothing compared with what our people will suffer if we fail to do the right thing ... despite all the anger we are feeling inside, we must persevere.” Party discipline is much weaker at PASOK, whose support has dived to 8% in the latest opinion from the nearly 44% it commanded when Papandreou led it into power in 2009. Despite the growing rebellion, analysts expect parliament to pass the package, which also includes a bond swap which will ease Greece’s debt burden by cutting the real value of private investors’ bond holdings by about 70%. Some economists suggest that if Greece defaulted and left the eurozone, its new drachma currency would dive in value and allow the Greek economy to become internationally competitive. But government spokesman Pantelis Kapsis dismissed this notion. “We’ll have to reduce the deficit, regardless of whether we have the euro or not.” Eurozone finance ministers have told Greece that it must explain how 325mn euros ($430mn) out of this year’s total budget cuts will be achieved before it agrees to bailout. Bailout documents released on Friday left blank the amount of the rescue but even 130bn euros may not be enough. Finance Minister Evangelos Venizelos said yesterday that 15bn euros more might be needed to rescue the country’s banks, confirming estimates from EU officials. The banks are up to their necks in Greek government debt, the value of which will be slashed under the bailout, and have suffered huge losses of deposits as Greeks have either shipped their savings abroad or stuffed them under the mattress. Lawmakers need to approve the deal by today, otherwise the country won’t make a February 17 deadline to submit a debt swap offer to its private-sector bondholders, Venizelos said. The EU and the IMF have been exasperated by a series of broken promises and weeks of disagreement over the bailout. They will not release the aid without clear commitments by the main party leaders that the reforms will be implemented, regardless of who wins the next elections. The uncertainty has upset world financial markets, with stocks snapping a five-day winning streak on Friday and the euro tumbling. The bill, approved by the cabinet along with hundreds of pages of accompanying documents, sets out reforms including a 22% cut in the minimum wage, pension cuts worth 300mn euros this year, as well as health and defence spending cuts. “The government believes that sustained implementation of this policy programme, complemented by debt restructuring, will put the public debt on a clear downward path,” it says in a draft letter to EU and IMF chiefs, attached to the bill. In the same letter, the government promises to speed up implementation of reforms in the labour, product and services markets, cut spending, and push through a privatisation plan. One of the attached documents, which spells out the reforms Greece will have to undertake in return for the aid, says the target of cutting the debt to “about” 120% of GDP by 2020 from 160% now will be achieved. (Gulf times )