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On November 11, 2011, Lucas Papademos, the Greek economist, took over as Prime Minister of Greece from George Papandreou. Lucas Papademos had previously served as the Vice President of the European Central Bank between 2002 and 2010. He was also the Governor of the Bank of Greece from 1994 to 2002. While the impending elections are due in February 2012, the new Prime Minister was chosen following talks between George Papandreou, the President Karolos Papoulias and leader of the opposition.

The change comes in the wake of a severely damaging economic crisis that affected the Eurozone and the need for sweeping reforms to overcome the staggering debt that the country now faces. Despite having won, albeit marginally, a vote of confidence, George Papandreou could not get his coalition to back the EU bailout package. It is most likely that the country shall next go into polls on February 19, 2011.


Background

By late 2009 it came to light that the global financial crisis combined with unrestricted government spending had led the Greek economy to face its most deliberating economic crisis with a budget deficit rising from 3.7% in 2009 to 12.7% of the GDP by 2010. By end 2010 the country's total public debts had skyrocketed to reach about 120% of the country's GDP. To bail the Greek economy of the impending default on sovereign debt, the International Monetary Fund and the other Eurozone countries agreed on a bailout package worth $110 billion including $45 billion worth loans. Greece, in turn, was asked to implement strict sanctions and austerity measures which would be monitored by the IMF and the European Commission. In November 2010, the Eurostat projected a deficit at 15.4% and the debt of 126.8% the country's GDP. Another bailout package was proposed by the EU, with very severe austerity measures and reforms. The terms have been very unpopular with the people of Greece.

The Referendum That Never Was

George Papandreou took over as Prime Minister in October 2009, a socialist who promised more jobs and much economic comfort to the people of Greece. Papandreou was forced to advocate job cuts and severe austerity measures, quite the contrary of what he had promised, when the debit crisis came to light. In June 2011 George Papandreou and his government won a vote of confidence by about 155 out of the 300 seats.  In October 2011 George Papandreou announced that the terms of the EU bailout would be decided by a referendum held across the country in December 2011 – January 2012. The Prime Minister came under much criticism due to this move. Following overwhelming pressure, he withdrew the referendum plan and negotiations for the formation of a coalition government were initiated.  

Prime Minister Lucas Papademos

The disturbing debt crisis of Greece had triggered off a major political turmoil in the country. After about a week of negotiations between former Prime Minister George Papandreou, President Karolos Papoulias and leaders of the opposition, Lucas Papademos was proposed to head the temporary coalition to deliver Greece from its current financial troubles.

The New Democracy of Greece had initially proposed that the interim coalition government remain restricted. Papademos objected to the idea and proposed that members of both the parties, New Democracy and Panhellenic Socialist Movement (PASOK) participate in the government. New Democracy finally accepted the terms set by Papademos and on October 10, the new Prime Minister was sworn in.

The key task at hand, faced by Papademos' government is to approve the EU bailout package and to keep the country in the Eurozone. To avoid bankruptcy of the Greek economy, Papademos will be required to halt the debt deficit and set Greece back on the track to economic stability. But with the inclusion of both the major parties Papademos has succeeded in controlling over 254 out of the 300 seats of the Greek parliament and is best suited to push the economic reforms through. Greek Financial Bailout Package

Mr Papademos believes that the $130 billion (US $177 billion) financial bailout package needs to be ratified by the Greek parliament at the earliest. The implementation of the policies of the rescue package is another important task. The Greece bailout package was agreed on in a European Union summit in October 2011. As per the terms of the bailout package the private debtors of Greek holdings shall write off over 50% of their debts and the Greek government shall, in lieu, push through a stringent set of reforms and austerity measures.

 

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