Greek Prime Minister Lucas Papademos faces a vote of confidence in his six-day old government today as he races to secure financing designed to avert a collapse of the economy and keep Greece in the euro.
Lawmakers in parliament will cast their ballots in a roll- call vote, giving the 64-year-old premier a three-month mandate to implement budget measures and ensure a bailout of 130 billion euros ($176 billion) agreed to with euro partners on Oct. 26. Three of the five parties in the legislature backed his appointment, representing more than 250 of the 300 seats.
“What is being created here is a final chance for our country, a chance that must be exploited to the utmost,” Finance Minister Evangelos Venizelos said late yesterday. “This government has a specific mandate. It is of limited duration, yes, obviously, but it has historic potential.”
Papademos formed a government on Nov. 11 after four days of political arguing that followed global turmoil sparked by former Prime Minister George Papandreou’s plans for a referendum on the terms of the second European bailout. The plan, later dropped, roiled markets and angered Greeks and EU partners.
Obama Concerned
U.S. President Barack Obama said financial markets will remain unsettled by Europe’s crisis until policy makers persuade investors that they will “do what it takes” to ensure the integrity of the euro region.
“Ultimately what they are going to need is a firewall that sends a clear signal we stand behind the European project and we stand behind the euro,” Obama said at a news conference in Canberra.
Italian bonds led a slump in euro-area government debt yesterday as investors abandoned all but the safest assets amid rising borrowing costs at auctions and concern the euro region’s financial woes are deepening.
German two-year rates dropped below 0.3 percent for the first time yesterday, while the extra yield investors demand to hold 10-year bonds from France, Belgium, Spain and Austria instead of bunds all climbed to euro-era records.
“By doing all that is required, we help not only ourselves, but all of the eurozone,” Venizelos said in his speech to parliament yesterday. “A vote of confidence is not a formal and given act. It is a great symbolic, political, national and psychological act.”
Greek Yields
The yield on the 10-year Greek bond fell 30 basis points to 28.16 percent. Two-year note yields advanced 504 basis points to 115.47 percent. The euro was down 0.4 percent to $1.3534 at 12:57 p.m. in Athens. European stocks were little changed, with the Stoxx Europe 600 falling less than 0.1 percent. Greece’s benchmark General Index fell 2 percent to 720.99.
The first job for Papademos is to secure an 8 billion-euro loan installment under a previous 110 billion-euro EU-led rescue, which must be paid before the middle of December to prevent a collapse of the economy. Gross domestic product shrank 5.2 percent in the third quarter from a year earlier, the Hellenic Statistical Authority said yesterday.
Disbursement of funds was halted by German Chancellor Angela Merkel and French President Nicolas Sarkozy after Papandreou called for the national vote.
Samaras Support
Papademos’s appointment was agreed upon by Papandreou of the Pasok socialist party, opposition New Democracy leader Antonis Samaras and nationalist LAOS party leader George Karatzaferis. Samaras said today he would support the government, underlining it would be of short duration, with a specific mandate that would lead to elections on Feb. 19.
Samaras said his party agreed with the goals of the reform plan, though disagreed with the policy mix. He repeated that he wouldn’t sign a separate letter of commitment for the EU.
“There is no greater commitment than the signatures of the three party leaders and the president of the country with which we committed to support this government,” he told parliament.
Papademos, a former European Central Bank vice president, has said Greece’s membership of the euro is the only choice. He will meet with the head of the Institute of International Finance, Charles Dallara, in Athens at 8 p.m. Greek time today, the premier’s office said in a statement.
Also scheduled is a meeting with EU President Herman Van Rompuy and European Commission President Jose Barroso in Brussels on Nov. 21.
Cutting Jobs
Greece’s new government needs to push ahead with plans to cut 30,000 state workers and reduce pensions and wages to meet conditions for the loans. Unions have said they plan a general strike when the 2012 budget is voted in parliament.
GENOP-DEI, the union of workers of Public Power Corp SA, cut electricity to the Health Ministry in central Athens today to protest against a property tax being levied through the bills they send customers, according to a statement from the group. It also reiterated that the Greek government owes the former power monopoly 141 million euros.
Venizelos presents his 2012 budget to the new Cabinet for approval tomorrow, the anniversary of the 1973 student uprising against a military dictatorship ruling Greece at the time. Police will deploy 5,000 personnel to guard the march, according to a spokeswoman. The budget will be submitted to parliament the following day for discussion by lawmakers.
Debt Swap Talks
The finance minister, who must manage a debt swap that will slice about 100 billion euros off Greece’s debt burden, had telephone conversations yesterday with Olli Rehn, the European commissioner for economic affairs, and Dallara.
Greece plans to pay lenders 50 cents for each euro the government borrowed under the terms of the bailout plan. Its 4 percent notes due in August 2013 now trade at 35.5 cents. Fitch Ratings said the agreement with creditors would be a “default event” if implemented, while the International Swaps and Derivatives Association said it won’t trigger credit-default swaps, which are used to insure against non-payment.
It will be the second confidence vote in a Greek government in less than two weeks, after Papandreou agreed to step down in return for the support of lawmakers in a ballot on Nov. 4.
To contact the reporters on this story: Maria Petrakis at mpetrakis@bloomberg.net
To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net
