Greek opposition dashes hopes for unity

Greece’s opposition leader insists that his party will vote against the government’s latest round of austerity measures, dashing hopes that the nation’s political class will unite in a last-ditch effort to prevent a ­sovereign debt default.

“They are asking me to support the same kind of medicine for someone who is dying from that medicine. I will not do it,” Antonis Samaras, leader of the conservative New Democracy party, told the Financial Times in an interview.

The Socialist government plans to enact a €28bn ($40bn) package of spending cuts and tax increases next week to secure the next €12bn tranche of a €110bn international loan needed to avoid default.

Finance ministers of Greece’s eurozone partners issued a public plea on Monday for all Greek political parties to support the austerity programme, saying “national unity is a prerequisite for success”.

The German government signalled on Wednesday that Mr Samaras’s opposition to the austerity programme meant that it might not be able to support further aid.

The International Monetary Fund has stipulated that cross-party support is a precondition for any bail-out programme running beyond the life of Greece’s current parliament.

José Manuel Barroso, president of the European Commission, said this week that although the Greek opposition’s support was not “a formal condition” of receiving aid, the European Union believed that “for the success of the programme, we need as broad a political consensus as possible”.

However, when George Papandreou, prime minister, and Mr Samaras met last week to discuss establishing a national unity government, the talks ­collapsed in acrimony and Mr Papandreou chose the alternative route of reshuffling his cabinet.

The government has only a slender majority in the 300-seat legislature but all 155 members of Mr Papandreou’s ruling Pasok party backed the new cabinet in a vote of confidence in the early hours of Wednesday. All 86 New Democracy legislators opposed the motion.

Although the vote indicated that the government should be able to pass next week’s austerity package, international creditors are deeply concerned about Greece’s inflamed political climate. They fear that the reforms required to prevent a default and a severe shock to the world financial system may never be implemented unless Pasok and New Democracy set aside their differences and treat the debt crisis as a national emergency.

Mr Samaras said his main objection to the government’s policies was that they were squeezing demand out of the economy by increasing the tax burden while Greece was still in deep recession. This was demoralising the public, already suffering from high unemployment and wage cuts, and was causing businesses to shut down, evade taxes or flee the country.

“When despite your sacrifices you see no light at the end of the tunnel, you become angry, and you become angry at the system, not just specific politicians and parties. And that is dangerous,” Mr Samaras said.

“Liquidity is the top, top, top problem of the economy. Imagine what happens in the real economy when there is no private spending, no government spending and no foreign direct investment. Everything is closing down. There is a brain drain, educated people are leaving the country.”

Greece should cut value added tax, reduce the tax rate on corporate profits and slash employers’ social insurance contributions in order to stimulate economic recovery, Mr Samaras contended.

According to a draft report written by experts from the International Monetary Fund, European Central Bank and European Commission, which are supervising Greece’s compliance with its loan terms, New Democracy’s tax cut proposals are “unrealistic and incompatible with the overall objectives of the adjustment programme”.

But Mr Samaras said it would be “anti-Greek and anti-European” to persist with policies that were not even generating enough revenues to bring down the budget deficit. “Greece is a country that has always been very pro-European. We must not lose our pro-European identity.”

In spite of his profound differences with Mr Papandreou, he emphasised that he agreed with the government’s basic aim of eliminating the budget deficit, lowering the public debt to a sustainable level and avoiding a debt restructuring. “To me, restructuring is a ‘No, No’ word,” Mr Samaras said.

He called for the introduction of common eurozone bonds and said he appreciated the ECB’s essential role in supplying liquidity to Greek banks shut out of capital markets. “If the ECB were to cut off this source of funds, it would be the end of our economy, because we have no interbank market,” he said.

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