New Greek govt hit by yet another resignation

Associated Press + More

By DEREK GATOPOULOS and ELENA BECATOROS, Associated Press

ATHENS, Greece (AP) — Can there be one day without bad news for the new Greek government?

Perhaps, but not Tuesday. The coalition government suffered another setback as a second Cabinet member quit in two days over what critics called a conflict of interest.

The departure of Giorgos Vernicos was not in itself a major blow — he was the deputy at the merchant marine ministry — but it was the latest in a litany of missteps and bad luck that have halted the government's ability to regain control of Greece's austerity program.

Prime Minister Antonis Samaras' new conservative-led government was sworn in last week, ending months of political deadlock. But in the last week alone it has suffered a string of casualties.

— The designated finance minister resigned Monday due to illness after being hospitalized the day he was to have been sworn in.

— Samaras himself is recovering at home from a serious eye operation and will be unable to attend a European Union leaders' summit later this week.

— The two health problems delayed a visit to Athens by international debt inspectors, which in turn delayed their report on Greek debt for EU leaders.

— The latest casualty, Vernicos, said he resigned out of political "sensitivity" after the main opposition Syriza party accused him of maintaining an offshore company in what appeared to be a conflict of interest. Vernicos insisted he had suspended all business activity before joining the government.

— On the positive side, prominent economist Yannis Stournaras was named as Greece's new finance minister Tuesday. Stournaras, 55, was involved in the country's negotiations to join the euro and was head of the Foundation for Economic and Industrial Research, a think tank and research body.

Shares on the Athens Stock Exchange rose on the news of his appointment, closing up 1.59 percent at 575.83.

Greece has been surviving on €240 billion ($300 billion) in rescue loans from other EU countries and the International Monetary Fund since May 2010. Samaras' government has promised to push for a break from the harsh austerity measures demanded by creditors as Greece struggles through a fifth year of recession.

Samaras' office said he spoke on the telephone Tuesday with German Chancellor Angela Merkel and eurogroup head Jean-Claude Juncker, after talking on the phone with President Barack Obama. He was also preparing a letter for a Greek delegation to hand to EU leaders at this week's summit.

Ben May, economist at Capital Economics, estimates Greece should have enough money to get it through the end of July. He expects some form of negotiations to take place this week on Greece's bailout terms, even if the prime minister can't be in Brussels in person.

May said the delay of the debt inspectors' visit to Athens "could be a problem" and will make debt negotiations all the more urgent.

"Time will be tight. They won't want to take negotiations to the wire," he said of Greek politicians.

Stournaras, the new finance minister, has publicly criticized Greece's avoidance of carrying out broader structural reforms to cut costs, arguing that successive tax hikes to try and improve public finances will ultimately fail.

"I do think we have the ability to get past this problem. But we must be realistic," Stournaras said about Greece's financial crisis. "We have a difficult road ahead of us, an uphill road ... but Greece is a country with great potential."

The salary cuts and tax increases that Greece has imposed have sent unemployment spiraling to above 22 percent.

Backed by conservatives, socialists and a small left-wing party, the new government has said it wants to lower some taxes, freeze public sector layoffs and extend by two years the mid-2014 deadline for the austerity measures.

European countries appear cool to the idea, however. Germany, the largest single contributor to the rescue loans, has insisted repeatedly that Athens stick to its commitments.

Many financial experts, however, think the current terms of Greece's bailout are not sustainable, and something needs to be done if Greece is going to be able to stay in the 17-nation eurozone.

Socialist leader Evangelos Venizelos said Greece remains committed to the EU and to the joint euro currency.

"The message is that we respect our institutional relationship with our partners," he said. "Greece will not take unilateral actions ... but is asking for an organized review of the (bailout) agreement."

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Demetris Nellas in Athens and Carlo Piovano in London contributed.

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