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article imageGreek Prime Minister warns of chaos ahead

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By Marlene de Wilde     Feb 11, 2012 in World
As more MPs indicate their oppostion to the latest austerity measures, Greek Prime Minister Lucas Papademos warns that, should the package not be approved on Sunday, the nation would be sent down "an unknown and dangerous path".
In a transcript of his comments reported by Bloomberg,“The social cost this program implies will be limited compared to the economic and social catastrophe that would follow if we don’t adopt it. The completion of the program and financial support will cement our country’s future in the euro area.”
Six members of his cabinet have already resigned rather than vote for the measures. The leader of rightist political party, LAOS, Mr George Karatzaferis, announced in a press conference on Friday that he will not vote for the measures when they are put to parliament even though he continues to support the government. Four of the resignations submitted to Papademos were from the LAOS party.
Milena Apostolaki,an MP for the leftist PASOK party, has also announced that she will also vote against the measures, contrary to the official party line. Party leader George Papandreou said in Ta Nea that "We have reached the well and now the country must drink". Antonios Samaras, leader of the conservative New Democracy party, has also directed his lawmakers to pass the legislation which will not only bring in over $170 billion but also ratify the reduction of the debt to private creditors by over $130 billion.
The choice of accepting the second package of financial aid is seen as the lesser of two evils but an increasing number of financial analysts, national and international, are saying that the Greek debt is unsustainable. In the words of Simon Johnson, professor of finance at Massachusetts Institute of Technology and former IMF analyst, "Greece is effectively in default."
He said in an interview with Bloomberg that Greece is playing for time and that, when the actual default ineviteably occurs, it will be all the more painful. "Greece is in default. It is not paying its debt. This whole fiction of voluntary restructuring is a fiction made possible by regulators twisting the arms of European banks. It's a default situation and should be treated as such."
"The situation in Europe is seriously out of control and no-one is really addressing the fundamental problems and the way those can spill over and affect the American economy. The politicians in charge have really acted in a most irresponsible manner for the past three or four years."
In the Wall Street Journal, Willem Buiter and Ebrahim Rahbari of Citigroup give Greece 50-50 odds on leaving the single currency within the next 18 months.
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