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Greece picks new Prime Minister

10 November 2011, 17:29

Athens - Greece's rival political parties on Thursday agreed on former central banker Lucas Papademos as the next prime minister, giving him the daunting task of ending the chaos that has helped bring the euro to its knees.

"The president has given Mr Lucas Papademos the mandate to form a government," the office of President Carolos Papoulias said, after four days of talks under intense international pressure with bankruptcy weeks away.

The new government would be sworn in on Friday, the statement added, as the news sent the relieved Athens stock market on the rise.

Papademos, a low-key technocrat with a high regard in international financial circles, now faces a race against time to restore Greece's battered reputation in Europe before it runs out of cash to pay pensions and salaries.

Mountainous to-do list

His first job is to persuade the EU and International Monetary Fund to disburse an €8bn slice of aid from a 2010 bailout deal that is needed by December 15.

Then he must force through painful austerity measures exacted as the price for a second EU bailout package which gives Athens €100bn in loans, the same amount in debt reduction and a further €30bn in guarantees.

Drawing a firm line in the sand, crisis-weary France and Germany last week gave Athens a stark choice: pass these belt-tightening measures or leave the euro.

Papademos must also bring together Greece's warring politicians for a unity administration in a country used to adversarial politics - compromise rather than combat.

Raising the pressure on Athens, International Monetary Fund chief Christine Lagarde reiterated earlier on Thursday her call for "clarity" in both Greece and Italy, which is also reeling from huge debts and about to change its prime minister.

"Political clarity is conducive to more stability... it is much needed in Greece, it is much needed in Italy," Lagarde told journalists in Beijing.

No hope leaving recession

"We have a very tough decade ahead of us, hence unity and co-operation is called for," said George Haralambopoulos, from the ruling socialist Pasok party.

"The fact that we have participation from both main parties in this government means there will be less external criticism," he told state TV NET.

Highlighting the parlous economic situation in Greece, the European Commission said it had abandoned all hope of a climb out of recession next year, tipping another 12 months of economic contraction for Papademos' incoming coalition government.

Socialist premier George Papandreou, whose father and grandfather were both prime ministers, bade the nation farewell in an emotional televised speech on Wednesday after two austerity-filled years at the helm.

Market panic

But the political drama descended into farce as an apparent done deal collapsed in acrimony, with the head of Greece's small nationalist party storming out of talks after the choice of leader appeared to settle on the country's parliament chairman instead of Papademos.

Deputies from both Pasok and the main opposition New Democracy conservatives are believed to have also opposed the appointment of parliament head Philippos Petsalnikos, arguing that someone with greater clout was required to hold talks with Greece's creditors.

Papademos enjoyed the advantage of a strong reputation in international financial circles but reportedly made tough demands earlier in the week, for example asking for elections to be delayed.

Meanwhile, Greek statistics showed unemployment in August - the peak of the country's busy tourism season - at 18.4% with over 900 000 people out of work.

Since Greece's troubles emerged, alarm at eurozone countries' huge debts has spread, triggering market panic and prompting rescue packages for Portugal and Ireland, and raising deep fears at the prospects for Italy.


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