Greece’s newly named caretaker prime minister, Lucas Papademos, says his country is at a “crucial crossroads” and it won’t be easy to fix the huge problems facing the Greek economy.
Thursday, Greece’s feuding political leaders named Papademos, a former vice president of the European Central Bank, to be the country’s interim leader until a national election is held, likely next year. Outgoing Prime Minister George Papandreou handed him the responsibility for carrying out Greece’s hugely unpopular austerity measures demanded by its international creditors in exchange for more money to keep the country from defaulting on its debts.
Stressing stability, unity
Papademos, to be sworn in Friday, said “the course will not be easy.” But he said the country’s continued use of the euro currency is a “guarantee of monetary stability” and that Greeks “must all be optimistic about the final result” if they stay united.
The U.S.-educated economist has never run for elected office and is viewed as a non-partisan personality. Analysts say he is well-connected in European capitals.
His appointment came as the European Union voiced new concern about the continent’s economy. Economic affairs commissioner Olli Rehn said “growth has stalled in Europe” and that there is a risk of a new recession.
Risk of recession
The EU predicted economic growth in the 17-nation eurozone would amount to just five-tenths of one percent next year, plunging from an earlier 1.8 percent projection.
With the Greek selection of a new leader, the focus of the European debt crisis again turned to Italy. Italian Prime Minister Silvio Berlusconi, who has promised to step down after Parliament passes tough austerity measures, appeared Thursday to endorse the man widely seen as his replacement, leading economist Mario Monti.
Focus on Italy
A former European Union commissioner, Monti could be named to head a new government that hopes to implement Italy’s budget-cutting plan aimed at reducing the country’s $2.6 trillion debt.
German Chancellor Angela Merkel said it is important for Italy, with Europe’s third largest economy, to quickly push through its austerity measures and settle on its political leadership.
In the meantime, Italy’s borrowing costs have soared this week above 7 percent – higher than the rate that forced Greece, Ireland and Portugal to ask for bailout loans. The EU predicted that Italy’s economy will only grow by one-tenth of a percent in 2012.