Greek PM gives new hint he may call election

Reuters.com

By George Georgiopoulos

ATHENS | Sat Oct 30, 2010 4:11pm EDT

ATHENS (Reuters) - Greek Prime Minister George Papandreou gave a fresh hint Saturday that he may call a new general election if his party fares poorly at municipal polls next week, a prospect that has sent jitters through markets.

With opinion polls showing his socialist party's popularity declining before the municipal elections on November 7, Papandreou has been urging Greeks to support his government's efforts to tackle a crisis that has shaken the euro.

"If our course so far starts to be doubted, if we show that we are losing resolve in the middle of the road and are being led to destabilization, confidence in the country will be lost," Papandreou told Sunday's RealNews paper in an interview.

"In such an eventuality, there will be no other solution than for the Greek people to speak, to condemn policies of destabilization and decide on the country's future course," he said.

The remarks will be seen as a fresh hint that he is prepared to call a general election, a prospect he first suggested in an interview with seven TV stations on October 25.

Financial markets are worried that a new general election could hurt efforts to resolve the crisis. Yield spreads on Greek government bonds widened over benchmark German bunds beyond 800 basis points after the October 25 interview.

Papandreou has not said precisely what results in the municipal election would prod him to call for a new general election, but he said the threat is not idle.

"I am not bluffing. The crisis we are facing is not a bluff. I noted an existing risk for the country if we subscribe to the (political opposition) New Democracy, the danger of turning back, seeing our sacrifices going to waste," Papandreou said.

Euro zone countries and the International Monetary Fund (IMF) have bailed Greece out with 110 billion euros in exchange for strict fiscal measures and reforms as agreed in a memorandum. Meeting these targets is key for continued funding.

In his 12 months in office, Papandreou has imposed harsh deficit-cutting measures, including public sector wage and pension cuts and higher taxes amidst Greece's deepest recession in decades.

Although his party still leads in opinion polls, belt-tightening and rising unemployment may inflict damage in the upcoming local polls, when Greeks elect mayors and local governors.

In another interview with Sunday's Eleftherotypia newspaper, Finance Minister George Papaconstantinou said stable political support was key to continuing the task of leading the over-borrowed country out of its fiscal crisis.

"It is not our intention to go to early elections. The prime minister's message was clear: the outcome of (municipal) elections will be taken into account to see whether the government can continue its course to save the country with the support of the people," he said.

The opposition conservatives, who voted against the bailout memorandum Greece signed with the EU and the IMF, have been calling for changes in the policy mix to help the economy recover from a downward spiral.

Papandreou also told the paper that despite an expected upward revision of last year's deficit by EU statistics office Eurostat, the government would meet key fiscal targets without new measures that would burden wage earners and pensioners.

He said next year would be difficult but would mark the end of the recession and ruled out any debt restructuring.

"We are not discussing such an eventuality (debt restructuring). Greece will meet its targets. These scenarios are originating from those who do not wish to see us succeed, the same people who have been betting on the country going bankrupt. Greece will prove them wrong, once again."