Greek PM steps down amid financial turmoil

November 7, 2011

All eyes are on Greece today after Prime Minister Papandreou promised to resign as soon as a bipartisan temporary government could be established.

As you may recall, last week Papandreou decided to send a long awaited bailout to the people of Greece for a referendum vote. This decision spooked markets, and then, according to The Wall Street Journal:

Greece’s euro-zone partners blocked the aid tranche after Mr. Papandreou’s plan for a referendum on the European Union aid deal raised questions about the country’s commitment to push through the loan agreement and the necessary fiscal and structural overhauls. Without it, Greece will run out of money by mid-December.

Though Papandreou survived a vote of confidence, he will announce his resignation after the formation of a new bipartisan, coalition government, which will have an easier task of instating the austerity measures needed to gain the latest Eurozone assistance. According to the Washington Post, Papandreou argued, “I am not interested in staying on in this new government as prime minister… I couldn’t have been clearer. I don’t play games, and neither do I gamble the country’s fortunes.”

So now that the referendum is officially cancelled, the opposition party will meet with Papandreou’s Socialist party to find a successive government and prime minister until early elections in February. An announcement on the new Prime Minister is expected today, before Eurozone finance ministers meet to discuss releasing of Greece’s next aid.

The Wall Street Journal reports that the coalition government was included in a broader roadmap for Greece:

Following Sunday’s cabinet meeting, the government released a road map of seven actions that need to be secured in coming weeks. Under this plan, Greece’s state budget for 2012 must be submitted to Parliament by 2012, the International Monetary Fund must ratify the payment of a sixth aid tranche on Nov. 21, while payments for the recapitalization of Greece’s banks and other aid under the new loan agreement should kick in from early January to keep the country afloat.

The New York Times expands that:

…the Greek Parliament pass a new round of deeply unpopular austerity measures, including layoffs of government workers, in a climate of growing social unrest. It also calls for permanent foreign monitoring in Greece to ensure that it makes good on its pledges of structural changes to revitalize its economy, a requirement that many Greeks see as an affront to national sovereignty.

Years of Greek overspending have put its sovereignty and economy at risk. Perhaps the new coalition government will be able to gain the consensus to enact lasting change.

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