Greek Economic Dilemma Evolves Into Political Crisis

Prime Minister George Papandreou says he will reshuffle his cabinet Thursday — and ask for a vote of confidence in parliament. Earlier in the day, state-run TV reported that Papandreou had been considering stepping down.

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In Greece, the economic crisis has turned into a political crisis. Prime Minister George Papandreou says he will reshuffle his Cabinet tomorrow and ask for a vote of confidence in parliament.

Earlier in the day, state-run TV reported that Papandreou had been considering stepping down. Joanna Kakissis has the story from Athens.

JOANNA KAKISSIS: There had been talk of early elections, but Greeks were shocked by the news that the prime minister had even considered resigning. In a two-minute televised speech Wednesday, Papandreou backed away from those reports.

Prime Minister GEORGE PAPANDREOU (Greece): (Speaking foreign language).

KAKISSIS: Tomorrow, I'm going to form a new government, he said, and ask for a vote of confidence. The time has come for responsibility.

The Greek prime minister had spent the day huddled with his advisors and talking to Greek President Karolos Papoulias and to Antonis Samaras, leader of the main opposition conservatives.

The American-born and educated Papandreou has had a rough year. The latest polls show that most Greeks no longer support his ruling socialist PASOK party, and most believe the country is headed in the wrong direction.

A year of spending cuts and tax hikes has worsened the recession, now in its third year. The unemployment rate among young people is around 40 percent.

(Soundbite of political protest)

KAKISSIS: Earlier on Wednesday, thousands of Greeks demonstrated in front of parliament, calling Papandreou and his ministers dictators and demanding they step down. Christos Fotakis, who is 29 and works at a natural gas company, said Greeks sacrificed for a year because they believed it would help the country. But now, he says, those sacrifices have bankrupted many Greek families.

Mr. CHRISTOS FOTAKIS: A family, they have to pay the house, they have to pay to pay the electricity, the water. The life is black. We don't see light in our future.

KAKISSIS: Greece is still teetering on the brink of default. Papandreou has asked the EU for a second bailout, and that looks likely, but the Europeans want more spending cuts and more reforms.

If the prime minister's new government fails, a coalition government could still be a possibility. But law professor and analyst Aristides Hatzis says such a coalition would only work as a short-term solution.

Mr. ARISTIDES HATZIS (Law Professor): The best thing is to do is to go to elections, to ask the people to give legitimacy to any kind of government: coalition government, one-party government, or whatever.

KAKISSIS: Hatzis and other analysts say those elections could come as early as September. Meanwhile, the Greek parliament must pass $40.5 billion in new austerity measures this month if Greece is to continue receiving rescue loans from the European Union and the International Monetary Fund.

For NPR News, I'm Joanna Kakissis in Athens.

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