- Associated Press - Monday, November 14, 2011

ATHENS, Greece — New Greek Prime Minister Lucas Papademos said Monday he is determined to keep the country in the eurozone, but acknowledged it is set to miss its deficit reduction target this year.

Papademos was sworn in last week to head a 15-week coalition government supported by the outgoing Socialists and rival conservatives. It was created to secure the approval of a new massive bailout deal worth €130 billion ($177.6 billion) from other eurozone countries and the International Monetary Fund.

A vote of confidence in Papademos‘ new government will take place in parliament Wednesday.

Presenting an outline of his policies, Papademos told lawmakers that for his government, Greece’s euro membership is “our only choice.”

He spoke hours after conservative leader Antonis Samaras defied a European Union demand to provide a written commitment to the new debt agreement — or else see rescue loans frozen.

“I take office during the most difficult moment in the country’s recent history… The country can be saved — it’s up to us,” Papademos said. “I think it is obvious for those who support this government to undertake the commitment and ensure that our country’s euro membership is not endangered.”

Papademos said the country’s budget deficit is set to reach 9 percent of gross domestic product this year, higher than earlier targets.

He promised faster implementation of structural reforms — including liberalizing market rules and making Greece’s giant public sector more efficient. He declared that Greece has already met requirements to receive the next €8 billion ($10.9 billion) rescue loan installment, vital to avoid bankruptcy. But he warned coalition parties that signing a commitment to back the new debt deal is now required for that vital payout.

“Our first priority is to immediately fulfill the preconditions for the disbursement of the (next) installment… This disbursement must be done by Dec. 15 at the latest, given our funding needs,” Papademos said. “Our eurozone partners have made it clear: The choice is between staying in or getting out of the eurozone.”

Greece is currently surviving on loans from a €110 billion ($150 billion) rescue package agreed in 2010, when huge borrowing costs blocked the debt-crippled country from international markets.

But that package later proved inadequate, forcing the new bailout agreed on Oct. 26 that will also see the reduction of the country’s privately held debt by some €100 billion, or 50 percent.

Athens is expected to officially launch talks in the next few days with banks and other private bond holders for the debt writedown provided under the new deal.

Meanwhile, Greece’s international debt inspectors — officials from the EU executive commission, the European Central Bank and the IMF — are set to travel to Athens very soon for discussions with the government and hopefully all major political parties, EU officials said.

Greeks have suffered some 20 months of harsh austerity, with repeated pension and salary cuts compounded by a spate of tax increases. Unions have reacted with a wave of general strikes and demonstrations, many of which led to riots.

Greek civil servants are planning a three-hour work stoppage Tuesday — the first protest against the new government.

“Our struggle will continue as long as social problems continue to exist and escalate, and as long as we continue to see people getting fired in the civil service, a reduction of income, rising taxation, and the sell-off of public property,” Ilias Vretakos, deputy leader of the civil servants’ union ADEDY told AP television.

However, Greeks appear relieved by the formation of the new government Friday, after 10 days of political wrangling triggered by the resignation of Socialist Prime Minister George Papandreou amid a party revolt halfway through his four-year term.

Some 73 percent of Greeks back Papademos‘ selection, according to a survey in Sunday’s To Vima newspaper, and 78 percent approve the coalition government. But only 26 percent said they expect the three parties to support the government’s work, with 56 percent voicing fears that the parties will focus on campaigning for February’s elections. The Nov. 11 poll of 1,000 people gave a 3 percent margin of error.

Nicholas Paphitis and Theodora Tongas in Athens, and Gabriele Steinhauser in Brussels contributed.


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