Conservatives soften election demands - The Best from Greece

Conservative New Democracy (ND) party signalled on Friday it would drop its insistence on holding elections in February, a move that would give prime minister Lucas Papademos more time to pass reforms and secure a vital debt restructuring deal.

 

Political deadlock over the timing of an election tentatively scheduled for Feb. 19 has up to now complicated efforts to reach an accord on a 130 billion euro bailout plan that includes a crucial bond swap arrangement with private sector creditors.

 

In a statement after a meeting between Papademos and ND leader Antonis Samaras, a party spokesman made no reference to an election date but said the government should be allowed to complete its reform commitments.

 

"It is clear that what has been agreed between political leaders still stands, which means the completion of the government's task and mainly the bond swap (PSI) and the new economic programme that will safeguard Greece's debt viability," said ND spokesman Yannis Michelakis.

 

Papademos, a former central banker appointed to secure the bailout agreement, is racing to complete tax, pension and justice reforms.

 

Under Greece's electoral laws, parliament would need to be dissolved in mid January for elections to take place as agreed a month later. That would leave lawmakers returning from a Christmas recess on Jan. 10 just a few days to pass pending bills and agree on the bailout.

 

The Socialists and the far right Popular Orthodox Rally (LAOS) party, both in the coalition government, have said Papademos should be given more time and he himself has repeatedly said that he would not be tied to the February date.

 

"We have to let Papademos govern," LAOS leader Yiorgos Karatzaferis told reporters. "February is a good month for carnival but not for elections."

 

ND is another coalition partner which holds a strong lead in the opinion pollsand had insisted on sticking to the February date agreed before Papademos was appointed to succeed socialist George Papandreou in November.

 

 

Banks and investment funds have been negotiating with the government for weeks over the terms of a deal under which they would accept a nominal 50 percent discount on their holdings of Greek bonds in return for a mix of cash and new bonds.

 

The arrangement is intended to cut Greece's debt by 100 billion euros, allowing it to bring its debt from 160 percent of gross domestic product to a still huge but more manageable 120 percent by 2020.

 

The so-called Private Sector Involvement (PSI) forms a central element of the overall bailout package, which Greece urgently needs to stave off a bankruptcy that could destabilise the entire eurozone.

 

Talks over PSI have been held up by disagreements over the real cost that investors will be forced to bear, through factors such as the coupon and maturity of the new bonds and on their status as creditors in the event of a default.

 

Deputy finance minister Yannis Mourmouras told the Imerisia daily newspaper there was still serious disagreement over several central issues, including the coupon to be attached to the new bonds and recapitalisation of the banking system.

 

The looming election has put a tight squeeze on the government, which faces not only the PSI negotiations but also the wider reforms demanded by the "troika" made up of the EU, the European Central Bank and the International Monetary Fund.

 

"We have an indicative date but it is obvious it will be adjusted, if necessary for the government to complete its task," government spokesperson Pantelis Kapsis said.

 

Troika inspectors are due to return to Athens on Jan. 15-20, to check on the progress on reforms and austerity measures. (Reuters)