Greek Socialists win confidence vote

Greece’s newly-elected socialist government won a vote of confidence in its programme.

The vote followed a three-day debate marking the beginning of its four-year term.

Prime Minister George Papandreou’s government won the midnight roll call vote on straight party line, 160 to 140. Voting against were all the opposition parties – the conservative New Democracy, the Greek Communist Party, the Left Coalition and the right-wing populist Popular Orthodox Rally (LAOS).

Mr Papandreou’s socialists ousted Costas Karamanlis’ New Democracy in a landslide victory on October 4, ending five and a half years of conservative rule.

The debate focused on the state of the economy, which Mr Papandreou described as “explosive”.

Greece’s economic output is expected to shrink “between one and two per cent”, according to finance minister Giorgos Papaconstantinou. The 2009 budget deficit is expected to reach at least 12% of the country’s gross domestic product (GDP) – double the previous government’s estimate and four times higher than the European Union’s deficit ceiling – and the debt to rise to at least 103% of GDP.

Mr Papaconstantinou said the new government may have to resort to borrowing by the end of the year just to pay public sector wages and pensions.

Despite the dire state of public finances, the socialists promised several extra spending measures, some with immediate effect, including an emergency aid package to low-income people, with a first instalment to be paid before the end of the year; an increase in farmers’ pensions with retroactive effect from October 1, an extra €1bn on education in the 2010 budget, the hiring of more than 3,000 health care staff in state hospitals and a boost in spending on infrastructure projects.

Additionally, the new government announced that it would repeal a law raising retirement age for working mothers, allowing them once again to retire at 50.

Mr Papandreou and Mr Papaconstantinou took the view that the burgeoning deficit could be controlled by cutting down on public sector waste and going after tax evaders.

Mr Papandreou also promised to make Greece’s National Statistics Agency an independent body that would no longer manipulate economic data to put the government in a favourable light.

“During your five years in government you doubled the debt from €160bn to nearly €300bn...you created 700 new state agencies and 470 commissions, most of them useless,” Mr Papandreou told the conservatives, accusing them of encouraging favouritism and corruption.

He also said he would implement a programme to jump-start the markets and boost liquidity and would submit a bill by January to ease the burden on heavily-indebted individuals and corporations.

Mr Papandreou’s resolve to boost the economy without resorting to deep spending cuts will be tested today when Mr Papaconstantinou will attend the EU’s Council of Finance Ministers (Ecofin) and attempt to persuade them to give Greece additional time to bring its deficit below 3% of GDP.

The EU had asked the previous government to do so by the end of 2010, but Mr Papaconstantinou said yesterday that the best the new government could do was reduce deficit below 10% in 2010 and would need three or four years to reach the 3% target.

Mr Karamanlis, who has announced he will step down as New Democracy leader by early December at the latest, was surprisingly conciliatory in his speech on Saturday, saying: “If you take bold measures to revive the economy, we will be by your side...it is time to go beyond the excesses of opposition politics.”

He urged Mr Papandreou not to give in to entrenched interests that would sidetrack reforms and added that his party would vote next spring for the re-election of Greek president Karolos Papoulias, thus avoiding the prospect of new elections.

The president, a largely ceremonial figure, must be elected by a three-fifths majority in parliament.