Greece's Samaras 'backs bailout'

The leader of Greece's conservative New Democracy party sent a letter today to the European Union and IMF saying he supported…

The leader of Greece's conservative New Democracy party sent a letter today to the European Union and IMF saying he supported the terms of a bailout aimed at saving the country from bankruptcy.

"We believe that certain policies have to be modified, so as to guarantee the programme's success," wrote Mr Samaras, who heads the New Democracy party.

"This is more so, since according to the latest European economic forecasts, Greece in 2012 will be the only European country with five consecutive years in recession," he added.

Wary of flip-flopping by Greece's politicians, the EU and the IMF had asked party leaders for written commitments to back austerity policies before doling out the next round of funds.

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It was not immediately clear whether the letter would satisfy the EU and IMF, who have demanded all Greek political parties sign a written commitment to back austerity measures beyond the term of the current national unity government.

Former prime minister George Papandreou's Socialists and the far-right Laos party have expressed their readiness to sign up. Samaras, who voted against the original €110 billion bailout, has criticised the new rescue plan and demanded a change to the policy mix he says only deepens recession.

The lenders want to ensure that the country sticks to the terms of the agreement even after the coalition calls early elections, which have been pencilled in for February 19th.

Greece has won a last chance to stay in the euro zone and needs an "all-out effort" to avoid being set back several decades, the country's central bank warned earlier today.

In a blunt snapshot of the country's precarious finances, the Bank of Greece said failure to hit fiscal targets, delays in implementing reforms and a sharp economic contraction had undercut its earlier assessments on the country's debt being sustainable.

"The country must avoid any further delays or deviations from targets at all costs; indeed, every possible effort needs to focus on overshooting the targets," the bank said in its interim monetary policy report.

"The present juncture is the most critical period in Greece's post-war history. What is at stake is whether the country is to remain within the euro area." New prime minister Lucas Papademos has promised to push ahead with reforms, although he faces lukewarm support from the main political parties and opposition from labour unions to a fresh round of austerity.

Greece's political leaders in general face a longer-term battle to convince ordinary voters that painful reforms are necessary and a price worth paying for international support to stay afloat and in the euro.

A euro zone bailout deal agreed in late October may well be the "last such opportunity" given to Greece, the bank warned, saying the two major parties, which have reluctantly agreed to back Mr Papademos until early next year, must deepen co-operation.

"In order to consolidate confidence in the prospects of the economy, the convergence of political forces reflected in the formation of the new government must become more substantive," it said.

"There are two national objectives which we must now pursue at all costs: first to generate primary surpluses . . . second, to speed up recovery," the central bank said.

It said the economy would contract by about 5.5 per cent or more in 2011, with the recession continuing in 2012 when the economy would contract by around 2.8 per cent.

Unemployment is expected to near 17 per cent this year, and may exceed 18 percent next year, it said.

Reuters