PM Papandreou rules out early Greek election

Last Updated: Monday, November 8, 2010 - 08:48

Athens: Greek Prime Minister George Papandreou ruled out calling a snap Parliamentary Election on Sunday after winning enough support in local polls to decide he could press ahead with a radical austerity programme.

The threat of an early election had unsettled markets and analysts said his decision had removed short-term uncertainties.

Initial official estimates put Papandreou`s socialist party (PASOK) ahead in seven out of 13 regions, with the centre-right New Democracy ahead in the rest, although some races we`re very close and almost all were set to go to a run-off next Sunday.

"Making changes is not easy. Greek people brought us to power a year ago and today confirmed that they want this change. We will continue with our task tomorrow," Papandreou said in a televised address to the nation.

Papandreou had threatened to dissolve Parliament, barely a year after coming to power, if the first round of the regional elections failed to give him a mandate to pursue budget cuts and reforms agreed in May under a EUR 110 billion (USD 154.4 billion) EU/IMF bailout to save Greece from bankruptcy.

Analysts had said Papandreou was taking an unnecessary risk by putting his comfortable majority and the EU/IMF fiscal policies on the line at a time when Greece is scrambling to meet tough year-end targets to slash a gaping budget deficit.

Many were relieved on Sunday night, but said a high abstention rate and a narrowing of the gap between the ruling Socialists and the opposition showed risks to Papandreou`s programme remained.

"The key thing is the dropping of the early elections threat, which reduces near-term uncertainty. But Greece still has to go through a very tough period and get all the policies through to stabilize its debt," said Ben May, at Capital Economics.

"The disaster scenario, if early polls were to be held, would have meant a whole lot of uncertainty. The result will be seen as positive by markets in the short term but whether it will lead to a sustained fall in yield spreads is not clear."

The spread between yields on Greek and German 10-year government bonds had risen by more than 200 basis points to above 900 since Papandreou first threatened an early national election in late October.

Bureau Report



First Published: Monday, November 8, 2010 - 08:48

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