Greece's new leader Lucas Papademos steels nation for tough future

 AFP November 11, 2011 8:39AM

Newly appointed Prime Minister Lucas Papademos leaves the Greek Presidential palace in Athens, saying the crisis-hit country was at a crossroads as bankruptcy loomed. Source: AFP

GREECE'S new leader, Lucas Papademos, has steeled his country for tough times ahead, as he assured Greeks of the need for the euro after being named to head a crisis government.

But Athens' European peers, who had watched with anxiety as power-sharing talks dragged on for four days, insisted on "strong cross-party" reassurances from the new team that will be sworn today.

Welcoming the designation of a new interim prime minister, EU president Herman Van Rompuy and European Commission chief Jose Manuel Barroso said: "It is important for Greece's new government to send a strong cross-party message of reassurance to its European partners that it is committed to doing what it takes to set its debt on a steady downward path."

Giving his maiden speech moments after receiving a mandate from Greece's president, Mr Papademos, a respected former vice-president of the European Central Bank, said the crisis-hit country was at a crossroads as bankruptcy loomed.

"The Greek economy is facing huge problems despite the enormous efforts made," the 64-year-old told a huge crowd of journalists outside the presidential mansion after political leaders took four days to appoint him.

"Greece is at a crucial crossroads ... the course will not be easy," he said.

He called on Greeks to pull together as the country faces up to its worst economic crisis in decades.

"The problems will be resolved faster ... if there is unity, cooperation and wisdom," Mr Papademos said.

The Athens market gained ground when his appointment was announced, but later slumped to losses.

Mr Papademos, who played a crucial role in Greece's entry into the eurozone nearly a decade ago, emphasised its benefits after weeks of speculation that Greece's problems could force it out of the 17-nation currency club.

"I am convinced that the participation in the eurozone is a guarantee of fiscal stability and a factor in economic prosperity," he said.

Named to lead a transitional government until elections, Mr Papademos said the new team's main task was to implement the terms of a vital EU bailout deal, but said "no exact time" had been set for polls, initially pencilled in by the main political leaders for February.

His first job is to persuade the European Union and International Monetary Fund to disburse an eight-billion-euro ($A10.7 billion) of aid from a 2010 bailout deal that is needed by December 15.

Then he must force through painful austerity measures exacted as the price for a second EU bailout package which gives Athens 100 billion euros in loans, the same amount in debt reduction and a further 30 billion euros in guarantees.

Drawing a firm line in the sand, crisis-weary France and Germany last week gave Athens a stark choice: pass these belt-tightening measures or leave the euro.

And highlighting the parlous position of the Greek economy, the European Commission said it had abandoned all hope of a climb out of recession next year, tipping another 12 months of economic contraction for the incoming government.

The previous EU forecast of 1.1 per cent growth was ripped up - with a 2.8 per cent contraction now expected in 2012 after a brutal 5.5 per cent recession this year.

Meanwhile, Greek statistics showed unemployment in August - the peak of the country's busy tourism season - at 18.4 per cent with over 900,000 people out of work.

Greece's new leader Lucas Papademos steels nation for tough future | The Australian