Europe Economy

Papandreou Aide Says He's Not Resigning

Greek Prime Minister George Papandreou's grip on power looked shakier Thursday after the storm surrounding his wish for a referendum on Greece's bailout deal grew, but he apparently has no plans to leave power.

The former Greek Prime Minister, George Papandreou
Pierre Verdy | AFP | Getty Images

"The prime minister has not resigned and does not intend to resign," chief of staff Regina Vartzeli told the website of Greece's Proto Thema newspaper.

Her statement came after increased speculation that politicians from Papandreou's own Panhellenic Socialist Movement (PASOK) party would form a new coalition with the opposition New Democracy party, if Papandreou stepped down.

Antonis Samaras, leader of the opposition New Democracy, called for a new coalition transition government to be formed, before snap elections, on Greek television Thursday.

Papandreou is expected to make a statement after an emergency cabinet meeting later Thursday. He will visit the President of Greece, Karolos Papoulias, after the meeting is finished, according to the Greek state television channel.

A vote of confidence in the government is scheduled for Friday – but it emerged Thursday that it was in jeopardy after several of its own MPs said they would vote against the government.

Greece will not receive its next tranche of financial aid until the question of the referendum is settled, and the next deadline for repaying maturing debt is December.

"It would be astounding if it could repay December’s maturing debt without further cash input from the EU and IMF," Simon Smith, chief economist at FXPro, wrote in a note.

The events of this week threaten to bring to a dramatic close a 30-year career in Greek politics.

Papandreou is the third of his line to serve as prime minister of Greece, after father Andreas – who founded PASOK - and grandfather George.

He came to power in October 2009 in the wake of the financial crisis, promising to restore the Greek economy to health.

Unfortunately, it is still the euro zone country with the highest debt-to-GDP ratio. Its population has grown increasingly restive as the extent of cuts required as part of the bailout it has received became apparent.

If the most recent bailout package goes through, a permanent task force of European Union spending controllers would be based in all Greek ministries to ensure compliance. Some Greek politicians view this as a step too far toward surrendering sovereignty.

Analysts at Societe Generale compared Greece's situation to that of the Weimar Republic, which suffered hyperinflation after reparations imposed on Germany following the First World War.

"A nation can only be pushed so far and positive incentives need to be set to guarantee cooperation," they warned in a research note.

"This has little to do with logic," Albert Edwards of SocGen wrote. "This is about politics and emotion. This is about what the Greek nation might or might not tolerate."

Papandreou, a 59-year-old graduate of Amherst and the London School of Economics, has also served as minister for foreign affairs and minister for education and religious affairs.

The father of two helped run the country's successful bid for the 2004 Olympic Games.