Greece's Papandreou, Socialist scion, felled by debt


Posted at Nov 07 2011 07:33 AM | Updated as of Nov 07 2011 11:15 PM

ATHENS - Greek Prime Minister George Papandreou was elected as a Socialist who would lavish jobs and benefits on the poor and working class, but was brought down two years later by an economic crisis that forced him to do the opposite.

He is expected to step down soon, after the presidency announced on Sunday that his PASOK party and its conservative opponents had agreed to form a national unity government to stave off bankruptcy. One of the conservatives' main conditions for participation has been his resignation.

The soft-spoken, genteel Papandreou, 59, has struggled to follow in the footsteps of his elder statesman grandfather and larger-than-life father, who each served multiple terms as prime minister and towered over Greek politics for much of the past century.

He was born in St Paul, Minnesota and educated in Canada, the United States, Sweden and Britain. Greeks occasionally mock his mistakes speaking his country's own language, as well as his mild manner and even his penchant for riding a bicycle, a far cry from the macho image many Greek politicians strive for.

As his political career came to a head last week with a failed gamble on a proposal to hold a referendum on the harsh measures required to avert bankruptcy, he insisted that he was not holding onto power out of personal ambition.

"The last thing I care about is my post. I don't care even if I am not reelected. The time has come to make a new effort ... I never thought of politics as a profession," Papandreou said on Friday before surviving a confidence vote.

His Socialists came to power in 2009 with promises to help the poor that had been left behind by an economic boom that followed the country's entry into the euro single currency.

But since he took power and announced that Greece's debts were higher than thought, the country has suffered its longest recession in generations, and the poor and working class have been hit hardest.

To stave off bankruptcy, Papandreou has been forced to impose severe spending cuts and hack back at a welfare state and a system of generous treatment of state workers seen as the legacy of his own charismatic father. PASOK has seen its popularity crumble and its parliamentary majority erode.

With European leaders demanding more cuts and Greek workers taking to the streets in violent protests, he gambled last week that a referendum on the bailout would finally allow him to demonstrate political support for the tough measures.

But the prospect that a "no" vote could throw Greece into abrupt bankruptcy caused mayhem in the markets, fury among other European leaders and defections in the ruling party.

Eventually he backed down on the referendum, saying the proposal had achieved its aim by persuading the opposition to back the reforms and join a coalition government. Their stated price for doing so has been his resignation.

Following father's footsteps

Throughout his career, Papandreou has had to prove his mettle within a PASOK party still nostalgic for his late father Andreas. It took him three national elections to oust his arch-rival, conservative Costas Karamanlis, as premier.

"We stand united, facing the big responsibility to change our country into a nation of justice, solidarity, humanity and green development," Papandreou told cheering supporters in October 2009 after PASOK won 44 percent of the vote and 160 out of 300 parliament seats.

His grandfather, also named Georgios Papandreou, first joined the government as interior minister in 1923 and last left it in a military coup in 1967. He served as premier three times, including as the leader of the Greek government in exile during German occupation in World War II, and as a dominant centre-left figure of the 1960s.

The second generation of the dynasty, Andreas Papandreou, cast an arguably even greater shadow as the founder of the PASOK party whose leadership the younger George Papandreou would eventually assume.

Andreas Papandreou angered Greece's Western allies with his political bravado and challenged Greek conventions with his turbulent love life.

George, who has previously held the posts of education and foreign minister, is a calm, discreet politician who became comfortable in European Union corridors of power in Brussels.

"Great potential", then crash

"We are a country with great potential," he told Reuters in a 2009 interview. "We have the political will to make deep changes in a just and equitable way, to put our country back on a development path, to meet the challenges of a new world."

But shortly after taking office, his government dropped a bombshell when it disclosed that the budget deficit would reach 12.7 percent of GDP that year, three times more than the previous government's original estimates.

This admission, which PASOK blames on its conservative predecessors, triggered the Greek debt crisis.

A raft of austerity measures followed to counter pervasive tax evasion and scale back a bloated public sector to meet the terms of EU and IMF bailout packages.

Ordinary Greeks hit worst by the severe cutbacks in wages, pensions and other benefits complained that a corrupt and wealthy political and business elite was escaping unscathed.

Waves of national strikes, street protests and civil disobedience ensued, undermining Papandreou's tenure.

By May 2011, 77 percent of Greeks in an opinion poll said they no longer believed he could extricate them from economic meltdown. By October, only 23 percent had a positive view of Papandreou.

Papandreou was handpicked by then-prime minister Costas Simitis, who secured Greece's euro zone entry, to lead the party in early 2004, partly on the strength of his family name.

Internal party dissent followed an election defeat that year, and he faced a direct challenge after his second defeat to Karamanlis in 2007.

He won the hard-fought internal battle, proving to friend and foe that he was more than an heir to a dynasty. He picked young, bright talent for top party positions and purged an old guard associated with decades of socialist graft.

But the dysfunctional aspects of Greece's economy within the euro zone remained unaddressed, bringing on the current crisis.