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Former Greek PM says austerity averted disaster

Photo of former Greek Prime Minister George Papandreou, courtesy of Robert Morris University

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By Thomas Olson
Thursday, Oct. 10, 2013, 12:01 a.m.

Speaking Downtown on Wednesday night, the former prime minister of Greece defended his austere measures that secured a bailout for his financially crippled country and averted “havoc” in Europe in 2009.

“Everyone thought Greece would be the tipping point for a global financial crisis,” George Papandreou said at Heinz Hall as part of the Pittsburgh Speakers Series presented by Robert Morris University.

Papandreou, who was born in St. Paul, Minn., and attended Amherst College in Massachusetts, served as prime minister from October 2009 to November 2011. Amid social unrest over high unemployment and severe government budget cuts, he resigned to allow the formation of a national unity government.

Greece, a member of the European Union, teetered on the brink of insolvency in 2010. To stem the crisis, the International Monetary Fund and European allies forged a $147 billion bailout. Terms of the loan called for the Greek government to raise taxes and adopt an austerity budget, which required furloughing 200,000 civil servants and slashing public pensions by 30 percent.

“But we succeeded in preventing a catastrophic default,” said Papandreou.

The country, however, is plagued by a lack of economic growth and an unemployment rate of about 28 percent.

The IMF is weighing another bailout package amid stiff resistance from other members of the European Union, especially Germany, which has contributed the most aid to Greece, said Marios Panayides, an expert on European economies.

“We aren't seeing any signs of Greece reversing those problems and growing the economy and creating jobs,” said Panayides, assistant professor of finance at the University of Pittsburgh. “And more and more young people are leaving Greece.”

Holders of Greek bonds are loath to forgive the debt, Panayides said, which further hampers Greece's ability to borrow money.

Some Greek leaders are considering pulling out of the EU, said Panayides. Such a move would raise concerns that other hobbled economies in the EU, especially Italy and Spain, might exit, too.

That would drive down the value of the euro, spook investors and dampen demand for U.S. exports to Europe, Panayides said.

Thomas Olson is a Trib Total Media staff writer. He can be reached at 412-320-7854 or at

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