Tough test for Papandreou as crisis grows

Nothing in George Papandreou’s previous political career prepared him for the task of defending Greece’s credibility in international financial markets or undertaking tough emergency economic reforms.

After leading the Socialist party to a sweeping election win last October, the 57-year-old prime minister and member of one of Greece’s main political dynasties, expected to steer Greece out of a shallow recession and promote growth through his strategy of “green development”.
The reality of his first 10 weeks in power has been very different.

Greece faces mounting pressure from markets and its European partners to follow Ireland and adopt harsh fiscal measures.

These would include a public sector pay freeze, a ban on civil service hiring and hikes in indirect taxes to bring the public finances under control.

But Mr Papandreou fears he may trigger a rebellion by Socialist leftwingers if he abandons campaign pledges of real wage increases and extra social benefits for low-income households.

A sociologist by training, he prefers to speak about reform in broad ideological terms without making detailed references to statistics or deadlines.

This approach may be severely tested in coming weeks, with analysts expecting Mr Papandreou to be pushed towards making a full policy U-turn to enforce unpopular measures.

But a question mark hangs over his capacity to deliver.

While in opposition for instance, Mr Papandreou reversed his stance on a sensitive policy area – the state’s monopoly on higher education – and yielded to pressure from university teachers’ and student unions, after initially pledging to support the conservative government’s attempt to overturn the monopoly.

“On the key issue of education George gave way to the party heavyweights who oppose reform. We don’t yet know whether he can face them down and impose policy,” said a former adviser to Mr Papandreou who declined to be identified.

The US-born Mr Papandreou lived in Sweden as a teenager after his family was exiled by the Greek colonels’ junta, then took degrees in the US and UK.

His lanky frame, soft-spoken manner and enthusiasm for riding a bicycle in suburban Athens all set him apart from traditional Greek politicians.

Local media write mockingly about his idealistic politics and north European lifestyle.

But he is also very much the product of a Greek “tzaki” (hearth) – the word used to describe a privileged political family with easy access to power.

Both his father Andreas, a former economics professor at the University of California, and grandfather George served as Greek prime ministers.

Mr Papandreou dutifully gave up the prospect of an academic career in Sweden and entered parliament at the age of 29 but only achieved a senior cabinet post after his father died in 1996.

In a video clip from last week’s cabinet meeting posted on YouTube, Mr Papandreou reminded colleagues of a comment made by his father during a previous Greek financial crisis in the mid-1980s.

“If we can’t make the [public] debt disappear, the debt will eventually make the country disappear,” he quoted Andreas Papandreou as saying.

But at this point the younger Mr Papandreou must wish he had inherited both a smaller public debt and a more deferential Socialist party.