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Greece debates crisis, ripples felt worldwide

Prime Minister George Papandreou defended his plans — a five-year package of new tax hikes, privatisations and spending cuts — to save Greece from default in Parliament on Sunday as European finance ministers met to agree on measures to keep the country afloat.

world Updated: Jun 19, 2011 22:40 IST

Prime Minister George Papandreou defended his plans — a five-year package of new tax hikes, privatisations and spending cuts — to save Greece from default in Parliament on Sunday as European finance ministers met to agree on measures to keep the country afloat.

New finance minister Evangelos Venizelos headed to Luxembourg to meet eurozone ministers who are expected to release a new aid tranche.

Greece was at a critical crossroads and its cash reserves would soon be exhausted without the €12-billion tranche from the EU and IMF, Papandreou said. “The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks, and the country’s credibility.”

The European Union and International Monetary Fund have demanded the plan in exchange for a fresh bailout worth some €120 billion ($172 billion) that Greece, effectively shut out of debt markets, will need to pay its bills up to 2014.

“We want a vote of confidence not because we are looking for scapegoats ...but because we want to take action and political initiatives in order for Greece not to depend on lenders in the future,” Papandreou said.

He said international lenders were not impressed by images of Greeks divided over the reforms. “Showing that we are split is not helping us at all.”

The Cabinet hopes to push the reforms through by end-June, but weeks of anti-austerity rallies on the steps of Parliament have created uncertainty and spooked investors who fear public rage may weaken the government’s resolve.

Workers at Greek state utility PPC said they would launch a 48-hour strike at midnight, which may result in rolling power outages, to oppose government plans to sell the company.