New Greek Government, Same Greek Woes

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Greek Prime Minister George Papandreou has agreed to step down and help form a coalition government that would be charged with implementing the draconian austerity measures agreed to between Greece and the EU in exchange for default-preventing bailouts. But will the bailouts work to stave off default and stabilize the precarious eurozone? Just as importantly, how much pain is yet in store for the Greeks and will these measures enable the country to overcome its economic morass?

The news of Papandreou’s departure broke late Sunday evening as talks between Papandreou’s socialist PASOK party and New Democracy leader Antonis Samaras, brokered by the country’s President Karolos Papoulias, achieved success in two main areas: Papandreou stepping down and an agreement to call for early elections. February 19, 2012 is the preferred date, but that detail, and other matters including who succeeds Papandreou, as well as the actual makeup of the new cabinet, remain to be decided.

Papandreou’s decision comes after his survival of a no confidence vote in parliament on Friday. But the writing was on the wall regarding his demise when several socialist deputies came out in favor of the prime minister’s resignation and the formation of a “government of national salvation” that would include members of Mr. Samaras’s New Democratic party, and other minor parties.

The major purpose of the coalition government will be to implement a series of tax increases, budget cuts, and drastic reductions in the government workforce passed last month that has infuriated Greek unions and ordinary citizens alike. It is the 5th time in a little more than two years that the Greek government has instituted austerity measures, all designed to get a handle on Greece’s out of control public spending.

In return for the cuts in spending and tax increases, the European Union and the International Monetary Fund, along with the European Central Bank, have agreed to implement the $178 billion dollar bailout package negotiated last month in Brussels. The package includes a deal with private holders of Greek government bonds that would give them 50 cents on the dollar for their holdings. The austerity measures and bondholder “haircut” is designed to bring Greece’s national debt from its current 180% of Gross Domestic Product down to 120% by 2020 while balancing the budget by 2015.

Papandreou almost blew the entire deal last Monday when, unexpectedly, he called for a nationwide referendum on the budget package. It proved to be a gigantic miscalculation and his eventual undoing. Not only was the plan for a vote on the austerity measures met with almost universal scorn in Greece and panic on European stock exchanges, it enraged German Chancellor Angela Merkel and French President Nicolas Sarkozy who had labored long and hard to seal the bailout deal with all parties involved. A “no” vote on the referendum would have led to Greece being denied the bailout funds, which would have resulted in an uncontrolled default and Greece leaving the euro for the drachma. Many analysts believe that a Greek default would start the dominoes falling of other nations experiencing debt crisis, including Portugal and Ireland. And it would threaten Italy, whose costs to borrow money has skyrocketed this past week with the political crisis in Greece.

By Thursday, with Papandreou facing a revolt of his own socialist deputies over the plan for a referendum, the prime minister withdrew it. After surviving the confidence vote on Friday and calls for his resignation coming from all quarters, Papandreou determined it was time to go. However, his ploy achieved something he may not have intended. In the end, it forced the opposition — including the New Democracy party — to also take responsibility for the austerity measures and see them through.

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  • Steve Chavez

    The Greek Communist Party (GCP) is leading the protests and our Communist Party USA declared official "Solidarity" with the GCP a few months ago. Our CPUSA also declared "Solidarity with the Iraq Communist Party" a few years ago even as the ICP was aiding in the insurgency and the killing of our soldiers.

    • PhillipGaley

      Whadya know, . . . an' here I thought the Communist Party was, . . . well, . . . maybe it's the beast of Revelation, whose deadly wound was healed, . . .

  • Steve Chavez

    Part Two: When the CPUSA led and directed "Audacity of Hope" Hamas flotilla was stopped in Greek ports, Medea Benjamin of Code Pink, and other flotilla members went to join in the Greek protests. (USTOGAZA.ORG).

    Code Pink also advertised the Sept. 17 Days of Rage which began the Occupy Wall Street but once the movement declared to be leaderless, Code Pink quickly took the advertisement off their website and the CPUSA was also silent but you can guarantee that their members, and front members, conceived and are directing the OWS with hopes of causing anarchy and even leading to class warfare or a civil war between races especially if Obama loses by a close margin.

    • mlcblog

      From what I saw in organizing meetings back in the late 1960's, this rings totally true!! thank you, Mr. Chavez, for sharing your observations.

  • Fergie

    If anyone knows how the IMF works, they will realize when they read from this article, “Also, the government is to sell off and privatize several state concerns including telecommunications giant Hellenic Telecom and sell stakes in various banks, utilities, ports, airports and land holdings in 2011/2012.” This is another natural and infrastructure grab by the IMF.

    Sounds like a conspiracy theory, but sadly it isn’t. The IMF did this to Indonesia and now the people there work for pennies, no health care, no ability to leave the Nike plant, the GAP plant, and others run by South Koreans. Their natural resources leave their country at an alarming rate with none of the profits returning to the people there, but going into the pockets of those who bought up the different landholdings, like mining companies destroying the landscape. The people have become nothing more than slaves to the countries in the IMF and sadly to say, BIG AMERICAN BUSINESSES ARE THE MAJOR PLAYERS.

    Each of the failing EU states will find themselves enslaved by the IMF if they don’t do something soon to stop their implosion.

    • mlcblog

      sounds like a power elite of some sort, once again laying claim to things that belong to us

      How dare they?!!! and I am a proponent of free enterprise, but there have to be rules and respect. Otherwise, it's piracy, as seems to be so in this case.

      Raping and pillaging of the people, and ruthlessly so. We need to fight more than ever to preserve our Constitutional way of life. It was based on a strongly moral and upright people who will always win and be blessed if they will just persevere.

    • Matt

      The IMF also screwed Argentina.
      Contrary to popular belief, The IMF is not your friend.

  • mrbean

    My fellow Americans, there are only two ways to deal with a 15 trillion dollar and growing debt problem:

    1) Pay it off

    2) Default

    The US has no chance at all of ever paying off its debts, which means some form of fraudelent default and articificial restructuring is coming our way in the future. And when this hits, it will make the Greece and EU defaults look like a picnic.

    • PhillipGaley

      . . . . 2.1) make regular installments

      2.2) get someone else to pay it off

      2.3) get someone to make installment payments, . . .

    • Fred Dawes

      Its 78 trillion not 15 and the USA Will become some monkey third world state. But that maybe justice, after-all we asked for it.

  • Seamystic

    For all Democracies!

    Except for a Gender addition, this is a cry of the past and present, by the original Poet.

    This specifically fits the National Debt turmoil forthcoming, WORLD WIDE.
    Check chapter 2 & 3 at: http//


    God, give us men and women! A time like this demands
    Strong minds, great hearts, true faith and ready hands;

    Men and Women, whom the lust of power does not kill;
    Men and Women, whom the spoils of office cannot buy;
    Men and Women, who possess opinions and a will;
    Men and Women, who have honour, who will not lie;

    Men and Women, who can stand before a demagogue
    And damn his treacherous flatteries without winking!
    Men and Women, sun-crowned, who live above the fog
    In public duty, and in private thinking;

    For while the rabble, with their thumb-worn creeds,
    Their large professions and their little deeds,
    Mingle in selfish strife, lo! FREEDOM WEEPS,
    Wrong rules the land and waiting Justice sleeps.

    Josiah Gilbert Holland (1819-1881)

    • StephenD

      Very Apropos. Thank you for posting it.

  • UCSPanther

    Once this economic crisis starts spreading like the fire it is, I wager that once it plays out, the EU will be no more…

    • Matt

      The 2 largest economies being Germany & France, will never be able to support the failed & or failing economies. The soon to arrive collapse of the EU will also have a severe negative effect on the US.
      The level of debt is such that not only will we see a collapse of the EU & US, but in broader terms the potential collapse of the banking system worlwide.
      Bailing out failed institutions or countries due to poor fiscal management only serves to create a bigger problem at a later date.
      Cutting Greece loose from the EU & letting them default is a smarter option.
      Will the EU bail out Spain & Portugal too?

      • mlcblog

        The EU was doomed to fail since its inception. People just don't tick that way.

  • Fred Dawes

    Once more what about the system and its banks? 180 trillion someone or all of us must pay that bill for the system, the new greek government means nothing its all about the bank payment, and as people have said the bankers will walk on this crimes and the poor will pay. The funny thing is most have forgotten about 2008.

    By the way we are next, so be happen living in a third world America.

  • Oleg

    Pretty much the blind leading the blind with the Greek debt crisis. You have groups of French and German Socialists (don't care what brand name they use) proposing solutions to another group of socialists (Green politicians) how to solve a debt problem. So big spending and big government types telling another group of profligate spending big government types how to solve their problems, it's like a group of drunks telling another drunk how to quit drinking.
    By the measures they have already taken, largely through hiking taxes, the Greek government has pretty much gutted whatever private enterprise they had left. Every time they hike taxes they destroy business, destroy jobs, and tax revenues go down, a perfect demonstration proving that the Laffer curve works both ways. Without private enterprise they will never get the economy going, never reduce unemployment and never get out of debt.

  • Oleg

    What's more who is going to buy these state owned industries that they propose to privatize? You have an economy that is contracting by double digits into the forceable future so even if they manage to find buyers for the telephone and other companies there won't be any money to be made unless they buy them for pennies on the dollar. Unless these industries are all money loosers then it won't help with the debt situation, if so then the Greek government would simply be cutting their losses. In my opinion the only way to solve this on again off again soap opera with the European debt crisis is for Greece and the other countries to stop drinking from the EU coolaid punchbowl, scrap big government, slash taxes, and go with free market capitalism like they have in Asia.