Papandreou raises stakes in local elections
By Kerin Hope
Published: November 3 2010 22:10 | Last updated: November 3 2010 22:10
An international security scare over
parcel bombs originating in Greece is adding to the problems facing George Papandreou, as the country gears up for important local elections amid rising fatigue with economic reform and worsening budget figures.
The prime minister raised the stakes by declaring Sunday’s elections a “referendum” on the €110bn ($154bn) bail-out by the European Union and the International Monetary Fund.
Mr Papandreou says he will call a snap general election in December if his Panhellenic Socialist Movement (Pasok) fails to win 13 key regional governors’ posts – the highest elected officials in
Greece’s local administration.
“I’m not bluffing,” Mr Papandreou said in a newspaper interview. “The country is at risk if we adopt the opposition view and roll back the reform programme.”
Yiannis Ragouzis, interior minister, said a decision on seeking a fresh mandate would be taken immediately after Pasok reviewed Sunday’s results.
Talk of a snap election just 13 months after Pasok came to power has pushed Greek bond yields to their highest levels since last May, just before the EU and IMF stepped in to avert a sovereign default.
“The domestic environment is deteriorating on rising political uncertainty and rumours of a significant overshooting of the 2010 fiscal target,” EFG Eurobank said in a research note. “Recent developments have created new significant uncertainties over the outlook for the stabilisation programme,” it added.
There was concern on Wednesday that the bombing campaign, which included parcels addressed to the French, German and Italian leaders, was aimed at stirring pre-electoral tensions, reviving fears that extremists will provoke a renewal of the street violence that dogged the reform effort earlier this year.
The popular mood is already grim.
A recent opinion poll for Mega television showed the government’s approval rating at 23 per cent, its lowest to date, as austerity bites deeper.
The polls show Mr Papandreou is still more popular than Antonis Samaras, the conservative opposition leader, who refused to back the EU-IMF programme, although his New Democracy party has supported some liberalisation measures.
That popularity could change swiftly if Greece were obliged to adopt further austerity measures in response to a deteriorating economic situation.
George Papaconstantinou, finance minister, has warned that the economy could shrink by another 3 per cent in 2011 against an earlier forecast of 2.6 per cent, on top of a projected 4 per cent contraction this year.
Budget revenues reportedly rose by just 3.6 per cent in the 10 months to October, compared with a downwardly revised target of 8.7 per cent, after delays in collecting personal and corporate taxes and a new real estate tax.
Greece’s chances of hitting this year’s deficit target of 7.8 per cent of gross domestic product appear to be fading, although the finance ministry hopes to plug most of the gap through further spending cuts and a scheme to settle tax arrears owned by businesses.
Yet Greece’s international backers are doing their best to support Mr Papandreou.
The European Commission has postponed the release of heavily revised figures for the 2009 deficit – marking another year in which Greece failed to produce accurate data on its budget performance – until after the local election.
These are expected to show a deficit above 15 per cent of gross domestic product, whereas the Greek finance ministry and its statistical service had estimated it to be 13.6 per cent, compared with an earlier estimate of 13.6 per cent by the finance ministry and the Greek statistical service.
The debt is likely to jump from 115 per cent to 127 per cent of GDP with the inclusion of items that had been moved off the balance sheet by previous governments.
FT.com / Europe - Papandreou raises stakes in local elections
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