Thursday, June 30, 2011
Papandreou Seeks to Turn Enforcer in Drive to Keep Default Danger at Bay
June 30, 2011
Greek Prime Minister George Papandreou may struggle to persuade investors he can implement a $112 billion austerity plan as Parliament votes on it in the teeth of violent street protests.
Having approved a bill yesterday setting out his strategy for budget cuts, lawmakers have just started voting in another ballot that Papandreou must win to start executing measures ranging from tax increases to asset sales. That may be easier than inflicting the plan on an economy mired in recession whose population is already enduring an income squeeze to curb the nation’s record budget deficit.
Protests may resume later after a general strike and crowds of more than 20,000 people paralyzed central Athens for the past two days in a standoff focused on Parliament as lawmakers deliberate on Papandreou’s proposals. While approval today would pave the way for Greece to secure a fifth tranche of money from the European Union to prevent a default, the yield on the country’s two-year bond is still above 26 percent.
“There is a real risk that, given the political problems, given the process, that at some stage it’s the Greeks who give up on the program,” Andrew Balls, Pacific Investment Management Co.’s head of European portfolio management, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “The EU partners are spectators when it comes to the Greek political dynamics.”