Greek Conservatives Threaten to Derail Austerity Budget

In a speech to Parliament, the new leader of Greece, Lucas Papademos has insisted that remaining in the Eurozone is our only choice” and that the new Athens regime must commit itself to abiding by the European Union’s (EU) conditions on reducing the deficit by implementing the austerity package.

“The main task of this government as agreed by political leaders under the president is to carry out the decisions of the [October EU] summit, and to apply economic policies linked to these decisions,” he said. “To continue efforts to restore the economy we need support from our European partners... and a new fiscal adjustment program.”

Greece has proposed a new austerity budget in exchange for another bailout of 130 billion euros ($177 billion) from other Eurozone countries and the International Monetary Fund (IMF).

The prime minister, who was selected just last week, following the resignation of George Papandreou, has also said Greece’s budget deficit will be reduced to 9 percent of GDP by the end of the year – down from 15.7 percent in 2009 and 10.6 percent in 2010. However, the 9 percent figure is higher than the government’s previous targets.

He noted that Greece has already met obligations required for the next 8 billion euro ($11 billion) tranche of the prior bailout from the Eurozone in order to stave off immediate bankruptcy.

He warned however that economic stresses in the country, including a worsening recession and higher unemployment, will present major challenges to Greece’s future financial solvency.

It is a fact that the crisis and the current policy have worsened recession and unemployment, Papademos told parliament.

He also spelled out the need to prosecute tax evaders.

However, there is already trouble brewing within the infant coalition in Greece.

Antonis Samaras, the head of the conservative New Democracy party, has warned that he will not agree to any new austerity measures, unless the government fosters more economic growth.

I agree with the goals to cut government spending ... to reduce debt, to erase the deficit, to make structural changes. I do not agree with whatever stunts growth, Samaras told party MPs.

Samaras also refused to sign a pledge to support the bailout terms as demanded by EU economic and monetary affairs commissioner Olli Rehn.

I don't sign such statements, he said.

Another coalition member, the far-right LAOS party, also threatened to withhold support for a new budget, ahead of a confidence vote this Wednesday.

Separately, Samaras has expelled a member of his own party Sotiris Hatzigakis for suggesting were “far right” elements in the party.

“I have been serving New Democracy for 37 years and I feel sorry that it ended up like this in the hands of Antonis Samaras,” Hatzigakis told reporters.

The Greek public is also strongly opposed to austerity. Many state workers have vowed to engage in nationwide strikes in protest.