2019
01/13

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Greek PM urges unity ahead of EU budget report

Greek Prime Minister George Papandreou urged political rivals to back his government’s crisis budget ahead of a crunch European Commission report on the plan’s feasibility.

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The socialist prime minister met with the leaders of the opposition conservatives, the far-right, the radical left and the communists as he sought to rally support for spending cuts aimed at slashing a runaway public deficit.

“We must act in an imminent and efficient manner and it is for that reason that I called on the political parties to support this national effort,” he said in a nationally televised address.

“It is a national duty not to let the country on the edge of an abyss,” he said.

Papandreou’s comments came as Athens awaits an announcement on Wednesday from the European Union’s executive arm on the plan, which aims to reduce the budget deficit to below the EU’s three-percent limit.

European Commission chief Jose Manuel Barroso said on Tuesday that the eurozone member’s programme was “feasible but subject to risks”.

The commission will recommend that EU member states endorse the Greek plans, though under “intense surveillance”, he added.

“A deficit of such a magnitude must be decisively corrected. Moreover the government debt in Greece is excessively high,” he said.

Civil Service pay frozen

Greece’s ballooning debt and public deficit, which reached 12.7 percent of output last year, have shaken the euro and put pressure on Greek sovereign bonds.

Papandreou said tough measures would be taken including a freeze on government salaries, a higher retirement age and an increase in fuel prices.

Right-wing opposition chief Antonis Samaras and the far-right indicated they would support the measures, but the radical left and the communists opposed them, saying they “serve the speculators”.

EU approval of the budget would help ease the pressure on Greece on financial markets, which has grown drastically in recent weeks amid investor doubts about the government’s ability to tackle the debt.

The yield gap or spread between Greek and German bonds, which are considered the safest in the eurozone, last week hit the highest levels in a decade.

Papandreou expressed support earlier Tuesday for the idea of a eurozone government bond.

“Eurobonds could be used to lend member states at a lower spread, a lower interest rate compared to the international market, particularly in this environment of speculation,” he said at a conference in Athens.

But Papandreou said that debate on the idea was continuing and observed that Greece would be ill-advised to call for a eurobond issue at this stage.

“When Greece talks about eurobonds it unfortunately works negatively, it is seen as a weakness. The issue of the bonds will hopefully happen,” he said.

Also at the conference, Nobel-winning economist Joseph Stiglitz, a former chief economist at the World Bank and an adviser to several governments hit by the economic crisis, called for a system to aid debt-hit EU states.

“(There is) a lack of European macroeconomic structure to help countries with particular difficulties,” he said, noting that in the United States the national budget can be used to help states in trouble.

While the European Central Bank regularly lends money to national banks at interest rates lower than the international market, the same option is not available to governments, Stiglitz said.

“If you are willing to lend to banks, why not lend to governments? Does Europe not have confidence in the governments that constitute it?” he said.

“There ought to be assistance through the ECB, through issuing euro bonds, through the European Investment Bank, creating funds that can help support investment, private enterprise, particularly within the countries suffering.

“Any small country in Europe can’t do it on its own,” Stiglitz said.

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