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Europe

Greek government claims mandate for austerity

Greek Prime Minister George Papandreou has said he will not call an early general election, claiming to be satisfied with the results of a regional poll. Papandreou had been seeking a mandate for his austerity drive.

George Papandreou

Papandreou never explained how he would decide

Greek Prime Minister George Papandreou has said he will not call a snap parliamentary election, claiming to have won sufficient support in local and regional polls to press ahead with austerity reforms.

Papandreou made the announcement on Sunday as his Socialist party (PASOK) appeared to have emerged narrowly ahead of rivals.

The threat of a general election had rattled financial markets, with fears that the Greek government would not be able to follow through on its unpopular budget drive.

A life ring on water with the Greek flag beneath

The budget measures come after an international rescue package was agreed

In a televised address to the nation on Sunday, Papandreou - who only came to power last year - said he felt satisfied with a fresh mandate to press ahead with the program.

"Making changes is not easy," Papandreou said. "Greek people brought us to power a year ago and today confirmed that they want this change. We will continue with our task tomorrow,"

Estimates early on Monday put PASOK ahead in seven out of 13 regions. The center-right New Democracy party led in the remaining regions, although some races were so tight that they are likely to be contested again next Sunday.

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Risk premiums on Greek government debt had risen in advance of the elections because of political uncertainty and the news was broadly welcomed by observers.

A Greek demonstration

The austerity drive has led to strikes and protests

"It's good news that Papandreou can continue and that no political uncertainty enters the fray," said Andreas Scheuerle, an economist at Germany's Dekabank.

Papandreou had at no stage indicated the criteria he would use to decide whether or not to call a fresh general election.

The government was forced to adopt a program of pay cuts, tax rises and a freeze in pensions - prompting strikes, riots and protests - after state finances were revealed to be far in a far worse state than expected earlier this year.

Those reforms were agreed as part of 110 billion euro ($154.4 billion) bailout package from the International Monetary Fund and the European Union in May.

The Greek economy, which represents about 2.5 percent of that of the euro zone, is expected to shrink by 4 percent this year.

Author: Richard Connor (AFP, Reuters)
Editor: Rob Turner

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