Greece: Lucas Papademos named as new Prime Minister
November 23, 2011
On 31 October, only days after the Greek rescue agreement from 27 October, Prime Minister Georgios Papandreou announced his government's intention to hold a referendum on the bailout package. However, after intense pressure from European leaders who blocked the disbursement of urgently needed EUR 8 billion until the Greek public had accepted the terms of the bailout, Papandreou scrapped the referendum plan and decided to step down as the country's Prime Minister. Following intense negotiations to make way for a technocratic government, Papandreou's socialist Pasok party and the conservative opposition party New Democracy decided to back a new government led by the former Central Bank governor Lucas Papademos, who was formally sworn in as Prime Minister on 11 November. The new Prime Minister will have to implement further painful reforms to tackle the massive public debt load and comply with the conditions of the EUR 130 billion bailout. After only a week in office, the new government unveiled the adjusted budget for 2012. Estimates for 2011 confirm that Greece will miss its deficit target of 7.6% of GDP for this year by a wide margin and will instead incur a deficit of 9.0% of GDP. Next year, the government aims to slash the public deficit to 5.4% of GDP, provided that the debt swap agreed during the October Eurozone summit goes ahead. Otherwise, the government expects the fiscal deficit to narrow to 6.7% of GDP in 2012. Moreover, the budget plan intends to reduce public debt from the expected 161.7% of GDP this year to 145.5% of GDP in 2012. In order to meet its targets, the government has pledged to lower the number of state workers by 30,000, reduce pensions and cut wages, which will most likely fuel further social unrest. According to the 2012 budget, the government expects the fiscal deficit to moderate to 9.0% of GDP in 2011 and 5.4% of GDP in 2012.