Greece teetering on the brink of collapse

Noorulann Shahid

Greece has recently been through testing times as the EU and IMF held talks to agree on a financial bailout package for the country. Unbeknown to the stakeholders concerned with the bailout, George Papandreou, Prime Minister of Greece decided to hold an imminent cabinet meeting regarding a public referendum. The shock announcement of the meeting ricocheted throughout world markets causing them to plummet, and the Euro weakened.  The Pasok socialist party in Greece criticised the Prime Minister for calling for a referendum. After much speculation, Papandreou reassured the media that the referendum concerned the terms of the bail-out package and not if Greece wanted to leave the Eurozone and return to its former drachma currency instead.

The referendum would have been the first in Greece since 1974, when the country voted to abolish the monarchy, shortly after a period of military dictatorship. “The referendum will be a clear mandate and a clear message in and outside Greece on our European course and participation in the euro,” a statement from Mr Papandreou’s office said. Papandreou has been widely criticised over the last six months for his handling of Greece’s debt crisis and has been accused of prioritising corporate welfare over the welfare of his own citizens. Angela Merkel of Germany and President Sarkozy met with Papandreou to insist he must accept the bailout deal or jeopardise the stability of the whole European Union. Following on from this, Papandreou made a U-turn and decided against the referendum.

Due to the widespread criticism, there was much speculation that Papandreou may resign soon. On the sixth of November, Papandreou announced to his cabinet: “I am not interested in remaining leader of the next government”, and is currently in talks with them as to who should front the new government, which could be a coalition set up. However, the talks ended with no real outcome as Antonis Samaras of the New Democracy party refused to negotiate unless Papandreou resigned first. Papandreou recently resigned, and Lucas Papademos, former Vice President of the European Central Bank was sworn in to lead Greece’s interim parliament; a temporary measure until elections next February.

Papademos’ priority should be to agree on a bailout deal to prevent the debt crisis from deepening. The deal gives the government 130bn euros (£111bn; $178bn) and imposes a 50% write-off on private holders of Greek debts, in return for deeply unpopular austerity measures.It is these austerity measures that caused Papandreou to hesitate in agreeing to the terms of the bailout deal, since Greece’s public sector is already crippled due to cuts.

Recently, the debt crisis virus has been caught by Italy as Prime Minister Silvio Berlusconi announced he would step down as he was stripped of his majority in parliament. He is set to quit after parliament approves of new budget laws which include reforms demanded by Europe. Berlusconi’s departure will mark the end of the billionaire media tycoon’s 17-year governance of Italy. His formal resignation could come as soon as this month. The turmoil in Europe looks set to continue over the coming weeks.

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