The Electoral Victory of PASOK and the Collapse of the New Democracy Government Under the Weight of the Crisis and Scandals at T
Total Page:16
File Type:pdf, Size:1020Kb
EMBASSY OF INDIA ATHENS No.ATH/COM/201/11/11 February 10, 2011 Economic and Commercial Report for November 2011 Executive Summary Greek Prime Minister George Papandreou announced on 1st November 2011 his decision to hold a referendum on the decisions of the Euro summit for the new loan agreement. A referendum to decide whether or not Greece was to accept the conditions under which the EU, the IMF and the ECB would allow a 50% haircut of Greek debt owed to private creditors, and suggested the referendum would be held on 4 December. At the time of the announcement of the referendum, polls in Greece suggested that up to 60% of Greeks were against the deal reached with the EU over Greek debt on 27 October 2011. The decision of Mr. Papandreou provoked strong reactions from the opposition parties, but also within the governmental party (PASOK) as well as EU leaders. On November 2, Mr. Papandreou met with the German Chancellor Angela Merkel and the French President Nicola Sarkozy, in Cannes at the 2011 G-20 Cannes summit, to explain why he announced a referendum. The two leaders stressed to the Greek PM that if was to proceed with his decision for a referendum, that would be a supposed questioning of whether Greece should remain in the eurozone and the European Union. After two days of intense pressure- foreign and domestic, the Greek PM finally called off the proposed referendum on 3 November. A vote of confidence for the government was held on 4 November. The Greek Prime Minister Mr. Papandreou said in the parliament, "I ask for the vote of confidence to avert the instability that would be caused if the country is dragged into elections. Now is the time for cooperation with good intentions and a feeling of national responsibility." He also said that he would seek a coalition government for four months in order to pass the new EU debt agreement. The government of Mr. Papandreou ensured the confidence vote with a vote of 153-145 in the 300 seat parliament, after PASOK's 152 MPs and MP Mrs. Louka Katseli formerly a member of PASOK (she was removed from PASOK party by Mr. Papandreou when she voted against on 20 October on the approval of a new austerity bill), supported the prime minister. She was then brought back into the party fold. A personal attack on PM George Papandreou was unleashed by ND party leader Mr. Antonis Samaras who accused Mr. Papandreou of “putting the country in the heart of a global storm for his own personal interest. He described the vote of confidence announced by Papandreou as “a cry of anguish of a PM who has lost all legitimacy in society” and described the referendum as proof of “a deadlock and a disclosure of extreme irresponsibility”. Mr. Samaras spoke extensively on the decision to create the ground for elections. Following the vote of confidence, Mr. Papandreou met the President of the Hellenc Republic Karolos Papoulias next day to begin talks on forming a new coalition government. Papandreou also said that he would resign and allow another interim prime minister. 1 On 7 November, the Deputy Prime Minister and Finance Minister of Greece, Mr. Evangelos Venizelos, met with the President of Eurogroup and Prime Minister of Luxembourg Mr. Jean-Claude Juncker and also with the Vice President of the European Commission and Commissioner competent for economic and monetary affairs Mr. Olli Rehn, during the preparations for the Eurogroup Summit the same day in Brussels. As announced by the Hellenic Finance Ministry, they discussed about the current political developments in Greece, the new political framework that was underway, the political conditions for the disbursement of the 6th installment, the preparation of the new loan agreement within the context of the new programme, and the progress in the participation of the private sector in the project for the long term viability of Greek sovereign debt (PSI). On 11th November 2011 Mr. George Papandreou was succeeded as prime minister by Mr. Loukas Papademos. The new Greek Prime Minister was sworn along with a cabinet made up of holdover ministers from the Panhellenic Socialist Movement party (PASOK), the New Democracy party (ND) and the Popular Orthodox Rally party (LAOS). The new interim coalition government, which was agreed on by the former Prime Minister Mr. George Papandreou, ND leader Mr. Antonis Samaras and LAOS leader Mr. George Karatzaferis, will be in place until elections, initially set for February 2012. The agenda for Mr. Papademos, is to push the terms of the second bailout package of 130 billion euros from the “troika” (EU-IMF-ECB) through parliament. European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso said that, Athens must move swiftly on the new agreement. The Ministry of Finance of the Hellenic Republic announced on 17 November that it has commenced a series of consultations with holders of Hellenic Republic bonds (through the IIF, other industry bodies, and directly). These consultations are being undertaken as part of the preparation for a transaction affecting those bonds consistent with paragraph 12 of the Euro Summit Statement of 26 October 2011. The October 26 Statement calls for an exchange of Hellenic Republic bonds in the hands of private sector creditors for new bonds of the Hellenic Republic in order to achieve a 50% nominal reduction in the outstanding stock of that debt. As announced by the Organization for Economic Cooperation and Development (OECD), during the unveiling of its regular interim report, released on 24 November, the recession in Greece will reach 6.1% in 2011 against a forecast of 5.5%, further shrinking of the Greek economy by 3% in 2012. In the OECD report, it is stated that the Greek economy fell deeper into recession in 2011, despite a recovery in exports, as the necessary fiscal adjustment was continued, leading demand to lower levels and raising unemployment. OECD says that the economy will continue to shrink in 2012, while GDP is projected to begin rising in 2013 driven by broad structural reforms, strengthening external demand, improvement of competitiveness and increase in investment. In its report, the organization calls upon the European Central Bank (ECB) to proceed with further relaxation of monetary policy and to design more radical emergency measures to rescue the Eurozone’s economy. The deficit next year is forecast at 7% of GDP. According to the data available for the ten months January – October 2011, the State Budget deficit amounted to €20,092 million compared to the new target of €20,362 million set in the Budget 2012 submitted to the Hellenic Parliament. During the same period in 2010, the State Budget deficit was €18,081 million. For the period January – October 2011, net revenues (€39,271 million) of the ordinary budget declined by 4.0% 2 as compared to the same period of 2010, while ordinary budget expenditures increased by 5.8% as compared to the same period of 2010. From January to October 2011, revenues from the Public Investment Budget (P.I.B.) increased by 38.1% (€521 million) vis-à-vis the ten months of 2010, while P.I.B. expenditures declined by 37.4% (€2,260 million). According to the 2012 Budget as discussed in the Hellenic Parliament, the General Government budget deficit in 2011 is projected to be 9% of GDP. According to quarterly data (flash estimates) by the Hellenic Statistical Authority, in the 4th quarter of 2011 in comparison to the 4th quarter of 2010, Gross Domestic Product (at base prices 2005) decreased by 7.0%. The Consumer Price Index (CPI) increased by 3.0% in October 2011, as compared to October 2010. Similarly, the Harmonized Index of Consumer Prices (HICP) increased by 2.9% in October 2011 as compared to October 2010. Greek unemployment rate in October 2011 was 18.2% (903,525 unemployed) compared to 13.5% in October 2010 and 17.5% in September 2011. In October 2011, the number of employed decreased by 303,768 persons compared with October 2010 (a 7.0% rate of decrease) and increased by 14,666 persons compared with September 2011 (a 0.4% rate of increase). In the age groups, the highest unemployment rate was recorded among young people in the age of 15-24 years (45.5%) and the age of 25-34 years (25.3%). A year earlier, in October 2010, for the same age groups, unemployment was 34.6% for the group of 15-24 years, and, 18.3% for the group of 25-34 years. The highest unemployment rates by region were recorded at Sterea Ellas with 23.3%, Kentriki Makedonia (Central Macedonia) with 19.7% and Attiki (Attica) with 19.2%. Also, unemployment amongst women reached 21.3% in October 2011 while for men unemployment rate was 15.9%. According to data announced by the Hellenic Statistical Authority (EL.STAT.) and processed by Export Research Centre (KEEM), Greek exports to India in the period January-October 2011 decreased by 5.3% amounting to 43.0 million euro compared to 45.4 million euro for the corresponding period of 2010. Greek imports from India in the same period increased by 31.9% amounting to 491.7 million euro compared to 372.7 million euro for the corresponding period of 2010. According to estimates announced by the Hellenic Statistical Authority (EL.STAT.), the total value of imports, excluding oil products, in October 2011 was 2,429.8 million euro against 3,045.5 million euro in October 2010, recording a decrease of 20.2%. The total value of exports, excluding oil products, in October 2011 was 1,316.2 million euro against 1,463.1 million euro in October 2010 recording a decrease of 10.0%.