Greece's government Tuesday pledged to meet budget goals and avoid default, just ahead of a crucial vote in parliament on a deeply unpopular property tax the country hopes will help secure further aid from international creditors.
Finance Minister Evangelos Venizelos told a press conference Tuesday that he expected the troika of inspectors from the International Monetary Fund, the European Union and the European Central Bank to return to Athens this week.
He said a decision on fresh aid for the country will be reached in October "in time" for the country to meet its obligations. "I am very optimistic about ... disbursement of the sixth tranche, as long as we do what is necessary," he said.
A senior Greek official said inspectors are expected to return Wednesday, provided the new property tax wins approval in parliament.
Greece has been under pressure to reach a deal with the troika after talks were suspended abruptly early this month in a dispute over whether the Greek government would have to take additional austerity measures to meet its deficit targets this year.
Greece's ruling Socialists face a key vote in parliament Tuesday amid growing fears that discontent inside the party could soon force a change in government, opening up a risky new chapter in Europe's widening debt crisis.
The vote on the property-tax law, due after noon ET, is expected to pass on the back of the Socialists' narrow four-seat parliamentary majority, analysts say.
Ahead of a meeting with German Chancellor Angela Merkel in Berlin later Tuesday, Greek Prime Minister George Papandreou said he can "guarantee" that Greece will deliver on all the austerity pledges made for its first €110 billion rescue program.
He also reaffirmed that the country will reach a primary budget surplus next year, but urged Europe to stop quarreling and concentrate on its proposals and reform projects.
"We must forge ahead immediately, not muddle through, with institutional reforms necessary to resist intensifying pressure from financial markets," Mr. Papandreou said in a speech at the Federation of German Industry, or BDI.
But many fear that further austerity measures—which must be voted on in the weeks ahead—may yet bring about an open revolt within the ruling party, forcing Mr. Papandreou to go to the polls.
"Everyone is waiting for the issue that will lead to a rebellion within the Socialist party. It probably won't come Tuesday, but it is coming," said David Lea, an analyst at Control Risks, an independent risk consultancy. "At that point, the only realistic option for the government is to call early elections, which would be the last thing the country needs."
Without parliamentary approval for the new austerity measures, Greece may not be able to secure further funding from its creditors, who are demanding tangible proof that the government will keep its promises after failing to implement earlier commitments. European Commission spokesman Amadeu Altafaj Tardio said Monday that finance ministers won't decide at their meeting in Luxembourg on Oct. 3 whether to give Greece an €8 billion payment, now due by mid-October.
Elected in a landslide victory in October 2009, the Socialist, or Pasok, party has seen its popularity plummet after two years of austerity measures it has implemented in exchange for a €110 billion bailout from its fellow euro-zone members and the IMF.
Since then, its parliamentary majority has already shrunk by six seats as rebel lawmakers have deserted the party, leaving the Socialists with just 154 seats in Greece's 300-member parliament. In the latest public-opinion polls, the Socialists would garner just 15.5% of the vote if elections were held tomorrow—more than five percentage points behind the opposition New Democracy party.
Worse still, polls also show that neither of the two major parties—Pasok or New Democracy, which opposes the austerity program—would be able to form a governing majority in parliament. Currently, both Pasok and New Democracy have less than 25% public support, which is insufficient for either party to win a working majority.
In the latest poll, conducted for privately owned Mega television and released late Monday, the main opposition party further widened its lead to 6.8 percentage points over the ruling Socialists. Public support for the center-right New Democracy party now stands at 22.3%, against just 15.5% for Pasok, the poll showed.
The poll also indicated that most Greeks don't think a new round of widely expected austerity measures will help the country to exit its financial crisis.
Acknowledging both the dissent within Pasok and rising popular anger over the austerity measures, Mr. Venizelos said the government had been forced to make difficult choices.
"We have made tough decisions which have a massive political and social cost," Mr. Venizelos said at the news conference.
Meanwhile, public protests continue, with subway and bus drivers walking off the job Tuesday, creating massive traffic jams in Athens for a second consecutive day. Tax collectors and customs officials also joined protest action with a 48-hour strike opposing salary cuts.
Athens's traffic woes are set to worsen Wednesday when employees from all modes of public transport strike, along with taxi owners.
Greece's two main umbrella unions—private-sector GSEE and civil-servants union ADEDY—have announced a nationwide public-sector strike for Oct. 5, and a nationwide general work stoppage on Oct. 19.
"Drastic measures have had a dramatic impact on the living standards of our citizens," Mr. Papandreou said. "Many Greeks feel they have little left to give."
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