Greek government wins vote of confidence

Greek prime minister George Papandreou on Tuesday won a critical vote of confidence in the national parliament, helping pave the way for $17 billion in emergency loans needed to keep his beleaguered country solvent.

Papandreou’s governing socialist party holds a slim 155-seat majority in the 300-member assembly, and public anger has been mounting over the country’s ongoing recession and the deep cuts to social programs demanded by the International Monetary Fund and other European countries as a condition of the emergency loans.
But following a cabinet reshuffle last week — and with the Greek government otherwise facing an imminent financing crisis and possible default on its bond payments — Papandreou prevailed even as thousands of protesters booed in a square outside.

“We must follow this course to save the country,” said finance minister Evangelos Venizelos, addressing lawmakers ahead of the vote, according to wire reports. “Distrust” that the country won’t follow through on promised reforms “is something we have to change.”

Major exchanges on Wall Street and in Europe were sharply higher throughout the day on the expectation that Papandreou would hold on to power.

But Tuesday’s confidence vote is only the first of several upcoming hurdles for Greece — and for European officials and the IMF who must now craft a longer-term solution for the country’s economic problems, and figure out how to pay for it.

The IMF has been warning this week of the risk that fraying political support for economic reform and government debt reduction in Europe could derail the region’s already slow recovery and damage the global economy as well. The point was reemphasized on Tuesday when the agency cautioned that recent efforts to bring government borrowing under control in Spain are “incomplete”

Three smaller European countries — Greece, Ireland and Portugal — are already under emergency programs jointly funded by the IMF and the 17 nations that share the euro as a currency, but a bailout of much larger Spain would be difficult.

With his authority as prime minister reaffirmed, Papandreou’s next test will come in a week when he must convince the Greek parliament to approve a new round of budget cuts, tax increases and other concessions needed to secure the next round of IMF and European rescue loans.

Opponents promised a fight over whether Greece should continue under an emergency program that many in the nation think has driven their economy into a deeper than expected recession without clear evidence of the expected growth.

Thousands gathered in Syntagma Square in Athens, outside the parliament, flashing green laser pointers at the building and criticizing the emergency program crafted for the country by the IMF and European powers like Germany.

“We don’t want the austerity measures that will lead to the country’s death,” a woman shouted from the square, the main site of demonstrations that pushed Papandreou’s government near collapse.

Cabinet changes last week dismissed finance minister George Papaconstantinou, an architect of the unpopular IMF-endorsed reform program, and brought in Venizelos, a veteran socialist leader whose presence helped stop defections from Papandreou’s party.

Labor unions have called a two-day strike ahead of next week’s vote.

Simon Tilford, chief economist at the Centre for European Reform, a think tank in London, predicted a tough fight for Papandreou in the coming week — and no guarantee that Greece is close to renewed growth.

“No government in Europe would be able to push through austerity of this level without light at the end of the tunnel. And there is no light,” Tilford said. “The economy is pretty much in free fall.”

Washington Post special correspondent Elinda Labropoulou contributed to this report from Athens. Washington Post special correspondent Karla Adam contributed from London.