GREEK PREMIER George Papandreou is coming under pressure within his own party over the next phase of the country’s EU-IMF bailout, a development that threatens to derail efforts to settle its debt crisis this month.
Greece and the EU-IMF “troika” are expected today to unveil an agreement in which Mr Papandreou will agree to implement dozens of contentious reforms in return for the release of a €12 billion loan to the country.
On the eve of this deal, however, 16 MPs in Mr Papandreou’s Socialist Pasok party issued a letter in which they challenged his preparations to put new austerity measures and a €50 billion privatisation plan to a single vote of parliament.
The development rattled the government, which has a six-seat majority in parliament, and prompted anxiety in European circles as officials weighed the possible consequences of the challenge to Mr Papandreou’s authority.
The pact due today is significant because it will clear the way for difficult talks with the country’s euro zone partners on a second international bailout.
Unhappy with the slow progress of the existing plan for Greece, euro zone leaders are reluctantly discussing a new loan package for the country because they fear it will remain shut out from private bond markets next year.
Amid continued market instability, these talks are urgent. They take a step forward today when Mr Papandreou meets Luxembourg’s prime minister, Jean-Claude Juncker, who is president of the group of euro zone finance ministers.
“I would like us to come to a final conclusion as far as Greece is concerned before the end of this month,” Mr Juncker said yesterday. “Greece will have to implement a very ambitious privatisation programme, it has to implement it, not only announce it.”
Following suggestions that Greece will have to submit to intrusive policy oversight by its international sponsors in return for any new aid, Mr Juncker said he believed “Greece will have a new programme submitted under strong conditionality.”
Mr Papandreou had hoped to soften the ground for the talks with his euro zone partners with the swift enactment of a single legislative act to give effect to all the new bailout reforms. This would enable him to move forward with more than €6 billion of cutbacks this year, the privatisation initiative and further series of swingeing fiscal reforms in the next three years. It would also protect him against the threat any wavering MPs would vote down individual measures as they came before parliament.
Pasok MPs will discuss the measures on Monday. Mr Papandreou will have to decide soon afterwards whether to proceed with his plan.
Amid deep divisions in his cabinet over the bailout, questions were immediately raised in Greek political circles as to whether the MPs’ letter signalled that moves were afoot to oust the prime minister.
It was quickly pointed out that 15 of the signatories backed the country’s defence minister in a prior challenge for the Pasok leadership against Mr Papandreou.
Chryssanthos Lazarides, an adviser to opposition leader Antonis Samaras, said the MPs’ manoeuvre suggested a push against Mr Papandreou’s leadership was likely.
“Probably it will evolve like that but we are not part of it,” he said. “We don’t want to get involved in the internal affairs of the other party because this is going to become messy. It can have all kinds of repercussions.”
Asked about the MPs’ manoeuvre, spokesman for EU economics commissioner Olli Rehn declined to comment.
“We are aiming for cross-party agreement to support explicitly the objectives and the main policies of the programme. If that was possible in Ireland and in Portugal, it could and should be possible in Greece.” Greek borrowing costs rose yesterday after Moody’s downgraded its debt and said there was a 50 per cent chance that it will default.
