Cabinet reshuffle buys Greece time to stop default
New austerity plan still to be approved by EU
Published 18/06/2011 | 05:00
GREECE is to seek approval from eurozone finance ministers tomorrow to agree to some changes in a biting austerity plan that parliament is expected to pass, the country's new finance minister said last night.
"The mid-term plan is the passport for reliability not only for the fifth tranche but for the problem of the viability of the public debt," Mr Evangelos Venizelos said last night.
"The mid-term plan will have to be voted with improvements that have already been made in committee. And those that have already passed (in committee) must be agreed officially with our partners," he added
Prime Minister George Papandreou handed the finance portfolio to Mr Venizelos yesterday in a cabinet reshuffle that seems to have won strong support from markets.
After two days of political chaos that threatened to bring down the government, Germany also appeared ready to provide billions more in aid to carry the debt-ridden country through 2014.
German Chancellor Angela Merkel indicated that the private sector would not be forced to share in the pain of a second bailout.
Together, the developments in Athens and Berlin boosted hopes Greece will get a second bailout and avoid a default.
Yields on Greek 10-year bonds dropped more than a percentage point to the still sky-high level of just under 17pc, while the Athens Stock Market closed up 3.8pc at 1,254.02.
Despite the more benign market backdrop yesterday, Greece faces years of trying economic times if it is going to get on top of its €350bn debt mountain.
"The country must be saved and it will be saved," said Mr Venizelos, who moves from the defence ministry. "I am leaving defence today to go to the real war."
By promoting Mr Venizelos, who challenged Mr Papandreou for the party leadership only four years ago, Mr Papandreou will hope he met the demands of his deputies so that the new package will get passed.
Socialist lawmakers had demanded he remove inexperienced loyalists from the Cabinet and replace them with more experienced party veterans.
"We are facing the greatest threat our country has experienced in recent decades," the prime minister told his new cabinet.
"We are again at a critical juncture in the middle of a difficult negotiation that is crucial for the future of the country -- for an immediate solution of a major national problem, the problem of debt that threatens to destroy us," he added.
Mr Papandreou has struggled to garner support for a crucial new package of €28bn in spending cuts and tax hikes demanded by the EU and IMF, which granted Greece's first bailout loans last year in return for austerity measures. The package must be voted through parliament this month if the country is to continue receiving funds from its bailout.
Mr Venizelos, who is expected to attend a meeting of eurozone finance ministers in Luxembourg beginning tomorrow, renewed a call to the opposition Conservatives to join the effort of reforming Greece's economy.
Mr Papandreou will travel to Brussels on Monday to meet with European Commission President Jose Manuel Barroso in an attempt to assuage fears about Greece's commitment to the bailout program. For weeks, the commission has called for cross-party support for the new austerity measures.
The prime minister had tried to face down a political crisis by negotiating with the conservatives to form a coalition government earlier this week, but the talks quickly collapsed.