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Ex-banker Papademos to lead Greek crisis coalition

By Reuters
Thursday, November 10, 2011 9:29 EDT
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ATHENS (Reuters) – Former European Central Bank vice-president Lucas Papademos will head Greece’s new crisis coalition, the president’s office said on Thursday, ending suspense over who will try to save the country from default, bankruptcy and an exit from the euro zone.

The coalition will be sworn in at 1200 GMT on Friday, a presidential official said after Papademos struck a deal on the national unity government with outgoing Prime Minister George Papandreou and the opposition leader.

“The Greek economy is facing huge problems despite the efforts undertaken,” Papademos said as he emerged from the talks brokered by President Karolos Papoulias.

“The choices we make will be decisive for the Greek people. The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence.”

Papademos, a respected figure in European capitals and on financial markets, said the coalition had the specific task of implementing a 130-billion-euro ($177 billion) bailout deal with the euro zone before calling an early election.

He cuts a grey and uncharismatic figure in the colorful and chaotic world of Greek politics, but also has a reputation for being calm at a time when the nation is clamoring for stability.

“He’s a clear policy thinker. He was never involved in politics. He knows what needs to be done,” said Thanos Papasavvas, head of currency management at Investec Asset Management in London.

The deal was struck after often chaotic negotiations among the party leaders, producing one deal to install the speaker of parliament as premier that collapsed before it had been sealed.

“After days of farcical comedy, Greece has today a prime minister who is fully qualified to succeed in the task he has been assigned to,” said Costas Panagopoulos, head of pollsters Alco.

“The fact that the parties finally managed to cooperate is also very positive. I hope that the big gap between political parties and Greek citizens will now start shrinking.”

DAUNTING PROBLEMS

In a sign of the daunting problems he will face, the statistics service ELSTAT reported that unemployment jumped to a record high of 18.4 percent in August — at the height of the tourism season when the rate traditionally falls — from 16.5 percent in July.

Papademos said he had set no terms to any political leaders before accepting the job but government sources said he had driven a hard bargain.

These included a demand that both Papandreou’s socialist PASOK and the New Democracy party of Antonis Samaras give a written undertaking to support the euro zone bailout package, which stipulates austerity measures which are likely to be highly unpopular with Greek voters.

EU Economic and Monetary Affairs Commissioner Olli Rehn, exasperated by broken Greek promises, has already insisted the leaders sign up before receiving even an 8 billion euro installment from Greece’s original bailout deal pulled together last year.

Unless Greece gets that money, it will default next month when big debt repayments come due. However, Germany and France have made clear they will not compromise the euro zone’s stability for the sake of Greece, and told the nation that it must decide whether it wants to stay in the bloc or not. ($1 = 0.736 Euros)

(Additional reporting by Renee Maltezou and Angeliki Koutantou in Athens, Jeremy Gaunt in London; Writing by David Stamp; Editing by Michael Roddy)

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