Greece chooses Lucas Papademos as the new Prime Minister

Finally after days of eager anticipation, Greece has found its new interim Premier in the form of Lucas Papademos on Friday. Papademos, a much respected economist and also an ex- European Central Bank vice president is the new head of the interim three-party coalition government, the national unity government. He has replaced George Papandreou, leader of the Socialist party, Pasok. The new government is expected to push through the long-awaited tough austerity measures and steer the country away from the massive debt crisis.

The swearing-in ceremony was graced by the President of Greece Karolos Papoulias and spiritual head of the Greek Orthodox Church, Archbishop leyronymos. In the new 48-member cabinet are Evangelos Venizelos, who retains his finance minister portfolio, and Stavros Dimas, as the new foreign minister. Dimitris Avramopoulos holds the post of both defence minister and New Democracy law maker.

To retain its Euro zone membership, Greece under the leadership of Lucas Papademos has some toughest measures to take to deal with the ongoing debt crisis. Foremost are; implementation of tougher austerity measures, securing the release of the next installment (8 billion Euros aid) as per 2010 agreement, getting the sanction of 130 billion Euros rescue package and the sanction of 2012 budget (considered to be the toughest one) by the parliament.

Italy on jitters over the debt crisis

After Greece, it is Italy’s turn to be hit by the spiraling debt crisis. On Monday, Europe’s financial crisis worsened as Italian government bond almost touched 15-year high, aided by slow economic growth. Like Greek Prime Minister George Papandreou, pressure mounted on Italian Prime Minister, Silvio Berlusconi, to resign and allow a new government to exercise reforms to reduce debt. But unlike Papandreou, the Italian Prime Minister refused to step down from his chair.

Unlike Greece, Portugal and Ireland, Italy needs a huge rescue package. The Italian debt amounts to 1.9 trillion Euros. It is feared that arranging for such a massive bail-out package could bring down the European Union, if not the global economy.

Monday saw the 10-year government bond of Italy touch 6.6 percent, the highest since Euro was introduced in 1997. As interest rate rises, government has to pay out more from its budget to investors who own these government bonds, thereby getting into debt.
The austerity measures promised by Italy to the European Central Bank was supposed to be passed before November 15th, current year. But that is caught in the deadlock because of conflicting interest within the government.

In an effort to save Italy from going under further debt crisis, European Central Bank has been buying government bonds to check its borrowing costs. But to tackle debt crisis, the Italian government must be prepared to take tough stand.

Papandreou secures the confidence vote

With the win of confidence vote on Saturday, the Prime Minister of Greece has tackled a crucial political crisis in the recent time. The victory stamps the official approval of the Greece parliament on the debt agreement reached with EU leaders last week. The win though came by a narrow margin, 153 to 145, is going to pave the way for the EU to sanction bail out package for Greece, needed to manage the current debt crisis. Saturday’s victory means, Greece is going to receive 8 billion Euros as relief installment from EU and IMF next month. This is expected to allow Greece to pay its next month’s bill and avoid immediate default.

As per the Greece bail out package, The EU along with IMF would finance a total of approximately 109 billion Euros in Greece debt. Major private sector banks in Europe has voluntarily agreed to contribute another 37 billion Euros. In exchange, Greece is expected to cut down on government jobs, reduce pensions and encourage privatization.

The vote ends a jittery week that started with Papandreou’s announcement of holding an election on Greece’s debt agreement. He was then forced into a humiliating climb-down not only by the EU leaders but also by the members of his own Socialist party, Pasok.

Also on Saturday, the Greece Prime Minister has called on the Greece President, Karolos Papoulias, to ask for his permission to help form a coalition government. He has expressed urgency to break through the controversial Greece rescue package. George Papandreou has also voiced his intention to step down to make way for the coalition government.

Greece Premier assures December ballot on debt crisis

With the fear of expulsion from the Eurozone looming large on Greece, Premier George Papandreou opts for early December vote. The referendrum is hoped to seal the deal for Greece’s chance to remain an Eurozone member. Though, in doing so, Greece will have to abide by severe austerity measures.

The assurance from George Papandreou came amidst veiled threat from European leaders, especially from France and Germany. The failure to get a clear mandate could mean Greece will cease to be a member of the Eurozone. Plus, it will stop receiving European aid. On the other hand, to remain an Eurozone member and in exchange of using the 12-year old currency, its banks will have to willingly absorb 50 percent loss in Greek bonds.

The threat is the outcome of Papandreou’s letter to Eurozone leaders on Monday. In the letter, Papandreou expressed his plan to hold an election on the second bail-out package details that was negotiated last week.

As of now, the European Union finance ministers are scheduled to meet next Monday to hasten the speed on decisions concerning the Eurozone relief package. But before this, Papandreou government is going to face confidence vote on Friday that will decide his own political career.