Greece succumbs to G7 as Papandreou bends over and sells the country
It was inevitably a humbling moment for George Papandreou, Greek prime minister, as he faced the television cameras on Friday against a backdrop of the shimmering blue Aegean.
The proud son and grandson of Greek prime ministers, he was having to admit failure in his four-month crusade against “market speculators” and appeal for outside help to rescue his struggling economy from collapse.
His formal, and abrupt, policy switch came after four days of intense market pressure pushed Greek bond yields to record highs, triggering speculation that the country would soon be forced to restructure its debt.
Yet he still went ahead with a planned trip to the remote island of Kastelorizo off the coast of Turkey, leaving his finance minister to arrange details of activating the €30bn ($40bn, £26bn) loan package.
“We are on a difficult course, a new odyssey … but we have charted the waters and we will reach our destination safely,” Mr Papandreou said, addressing the nation from Kastelorizo’s modest waterfront.
It was an apt metaphor for an island that in the 19th century was home to one of Greece’s wealthiest shipping fleets but now has fewer than 500 residents.
The prime minister announced his decision in telephone calls on Thursday night to José Luis Rodríguez Zapatero, prime minister of Spain, the current European Union president, and Angela Merkel, German chancellor.
It was a humiliating climbdown, given Mr Papandreou’s insistence since coming to power six months ago that Greece could solve its economic problems on its own.
Greece has to accept the surveillance of the International Monetary Fund as part of the deal – a fate avoided by both his father Andreas and grandfather George in spite of challenging economic times.
“Our final goal, our final destination is to liberate Greece from supervision, from trusteeship,” Mr Papandreou said, referring obliquely to the IMF structural programme that will accompany the loan package.
Greece will sign up next month for a separate €10bn-€15bn loan from the fund in return for rigorous reforms of healthcare and pension funds – both riddled with wasteful spending – and liberalising the labour market.
But as his trip indicated, Mr Papandreou is anxious to keep a distance from economic policymaking. More…