Greek rebel lawmakers may block austerity: deputy PM

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Greek rebel lawmakers may block austerity: deputy PM

By Flynn and Harry Papachristou | Reuters – 3 hours ago

ATHENS (Reuters) - Greece's deputy prime minister warned on Sunday that rebel

lawmakers may block some reforms sought by international lenders, though

parliament will probably back an overall austerity package this week to avert

national bankruptcy.

Adding to Socialist Prime Minister Papandreou's dire problems, the

conservative opposition rejected appeals from the government and senior European

Union politicians to vote in favor of the five-year plan.

Parliament is due to start debating on Monday the programme of tax increases and

spending cuts worth 28 billion euros. Papandreou needs parliamentary approval

this week to secure the next payment under a 110-billion euro EU/IMF bailout.

Deputy Prime Minister Theodore Pangalos told Spanish newspaper El Mundo he was

optimistic about overcoming discontent in his PASOK party to win a first round

of general votes on tax and spending targets and the creation of a privatisation

agency.

But he was more cautious about whether the government could push through further

enabling legislation on individual budget measures and privatisation of specific

state assets.

" I think the package of short and medium-term measures with which we basically

hope to establish the framework to undertake reforms will be approved without

difficulty, " Pangalos told the newspaper in the interview published on Sunday.

Approval of specific laws to enact painful fiscal reforms and privatisations may

be more difficult to achieve, he said.

" That's where we may have problems. I don't know whether some of our legislators

will vote against it. It's possible. "

Without the next 12-billion euro tranche of funding from the IMF and European

Union, Greece faces the prospect next month of becoming the first euro zone

country to default, sending shockwaves through a fragile global financial

system.

But many Greeks who have lost jobs or seen their real income decline by nearly

one-fifth over the last two years have reacted angrily to measures they say fail

to target wealthy tax evaders whom they regard as responsible for Greece's

plight.

Papandreou's PASOK party has seen its slender majority whittled down by five

defections over the last 13 months, leaving it with 155 seats in the 300-member

parliament.

In a rare piece of good news for Papandreou, one of the two PASOK legislators

who announced they would vote against the package appeared to be wavering on

Sunday after holding talks with Finance Minister Evangelos Venizelos at the

weekend.

" One moment I veer toward a 'no', the other toward a 'yes'. I will make a

last-minute-decision, " Robopoulos told Reuters. A third Socialist MP has

said he will support the deal only if Venizelos gives him assurances on certain

measures.

NATIONAL STRIKE

With Greece unable to return to international bond markets next year, as

foreseen under its EU/IMF programme, European leaders are working on a new

bailout of a similar size, including a contribution from private sector banks

which would agree to a " voluntary " rollover of their holdings of Greek debt.

Euro group president Jean-Claude Juncker, the prime minister of Luxembourg, said

on Sunday that the size of this private sector contribution would be discussed

at a euro zone finance ministers' meeting in early July.

Ramping up pressure on the government, unions have called a two-day national

strike from Tuesday. Many companies, including the main electricity group PPC

which is slated for partial privatisation next year, have started rolling

stoppages.

Pangalos, who after a cabinet reshuffle this month shares his deputy premier's

title with Venizelos, said he believed the conservative opposition would vote in

favor of some measures.

But New Democracy leader Antonis Samaras turned a deaf ear to the appeals from

home and abroad to support the package, saying the painful measures would only

deepen Greece's worst recession in 37 years.

" You can't ask for more taxes in an already overtaxed country, in a market that

has been sucked dry, with economic activity at zero and a huge recession, " he

said in a statement.

Greek ministers and policymakers had urged legislators to approve the austerity

package, adding to calls from European leaders to avoid a crisis in the

17-member euro zone.

German Finance Minister Wolfgang Schaeuble urged the Greek parliament to approve

the measures, warning that the EU would not relax this condition for disbursing

the next aid tranche.

" The stability of the entire euro zone would be in danger and we would need to

quickly ensure that the risk of contagion for the financial system and other

euro area countries would be contained, " he told German Sunday newspaper Bild am

Sonntag.

Venizelos, a Socialist party baron given the finance portfolio in the cabinet

reshuffle, clinched the agreement of EU and IMF inspectors on Thursday to a raft

of measures which he hopes can put government finances back on an even keel

after it failed to meet targets under its international programme.

The steps include a one-off solidarity levy on income, a rise in heating fuel

tax and the introduction of income tax even for low earners on wages of 8,000 to

12,000 euros a year.

A peaceful crowd of around 1,000 people gathered on Sunday in Syntagma square

outside parliament, which was protected by a line of riot police.

With youth unemployment running at around 40 percent, many of those who have

taken to the streets in protest or camped in Syntagma over the last month are

young people who fear the measures will worsen their dim economic prospects.

" The choice is not between voting for the measures or defaulting, but between

economic and social bankruptcy on the one hand and growth and social cohesion on

the other, " said the Left Coalition, a small opposition party, in a statement.

(Additional reporting by Rucinski in Madrid; editing by Ralph Boulton)