Greek Premier Faces Impasse Over Demand to Cut Private Wages

by Rachel Donadio

New York Times
February 3, 2012

Lucas Papademos faced his most difficult test as Greece’s interim prime minister on Friday when his three-month-old government reached an impasse over proposed demands by the country’s foreign lenders to reduce private-sector wages drastically in exchange for the aid the country needs to prevent default.

On Friday, the Greek news media swirled with rumors that Mr. Papademos was even threatening to resign if the political parties in his fragile interim coalition — the Socialist party, the center-right New Democracy party and the smaller, hard-right Popular Orthodox Rally, or L.A.O.S. — did not accept the lenders’ demands.

Even as government officials denied the rumors on Friday, it was clear that the prime minister was fast running out of options. To get the bailout money Greece needs and to complete an agreement with private creditors on a write-down of Greek debt, Mr. Papademos must persuade his coalition to support a new round of austerity measures that could drain them of their little remaining political capital.

In a climate of intense economic and political uncertainty, it remained to be seen whether Mr. Papademos, a former vice president of the European Central Bank with little experience in the blood sport of Greek politics, would be able to maintain control of his government, with a critical meeting with the three parties expected as soon as Saturday.

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