PM's support wanes as Greeks seek retribution

ATHENS (Reuters) - Party supporters cheered Prime Minister George Papandreou during a speech on the island of Rhodes this weekend but a shout from the crowd revealed a crack in his public image.

"Someone has to go to jail, Mr. Prime Minister," the voice interrupted his speech.

Public support for Papandreou is slipping after he wavered for months before asking for help in dealing with the worst economic crisis in decades. Approval for his government has taken a marked fall, opinion polls show.

As he prepares even tougher measures to meet conditions for an EU/IMF bailout package he triggered on Friday to cope with ballooning debt and deficit, he must take heed of increasing calls to maintain social peace.

If recent strikes intensify and protests turn violent, the government will find it hard to implement reforms which economists already deem to be monumental, increasing the likelihood of Greece defaulting on its debt down the road.

Measures being negotiated with European and International Monetary Fund officials to release a 40-45 billion euro aid package and help Greece exit a debt crisis shaking international markets are bound to fan anger.

In a country prone to protests, riots gripped cities in December of 2008, prompted by the police killing of a teenager and fanned by discontent at a slowing economy.

"For the time being (Papandreou) is enjoying the benefit of the doubt," political scientist Kostas Ifantis told Reuters. "But it's only natural that the popularity of his government and his personal popularity will decline in the months to come."

Now even tougher measures to tackle Greece's debts are in store. The European Union/IMF team in Athens is discussing more flexible labour laws, increasing the retirement age, cutting pensions and bonus salaries.

Unions have protested the public wage cuts and tax hikes announced so far and many analysts see public unrest increasing come autumn as cutbacks start to bite harder.

DEMANDING PUNISHMENT

The main demand by those feeling the pinch of austerity is punishment for corrupt politicians and their cronies who stole or squandered public money over decades.

"Those who stole the money, who evade tax, they should pay for the crisis. Not me or anyone else who lives on less than 900 euros a month," said office clerk Pavlos Anastoulis, 37. "There will be a social explosion soon, you can smell it in the air."

Although he virtually inherited the socialist party founded by his father Andreas, Papandreou is widely seen as untainted by the chronic corruption that has long haunted Greek politics.

"Corruption costs us 8 percent of GDP every year, 20 billion euros," he told supporters on Saturday on the southeastern Aegean island of Rhodes. "We must bring order to our country for the benefit of citizens ... we are all responsible for this."

His speeches are riddled with references to justice and transparency, of creating a new Greece of meritocracy, but how he responds to the demand for blood will be key to implementing tough reforms in the months to come.

For now, his government seems to be either not hearing the message or helpless to respond. Officials say it's hard to prosecute politicians protected by parliamentary immunity. For many, this also a sign of political parties' complicity.

Parliamentary committees set up to investigate numerous scandals, from suspect bond sales to pension funds to dodgy real estate deals with the state, under the previous conservative government have brought no politicians to justice.

FREE COMPUTERS

News that parliament approved a subsidy of 5,500 euros for each of the 300 MPs to buy new computers angered many at a time when the house speaker has been accepting children's piggy banks into an aid fund for Greece he created.

"MPs are going to drive us crazy: 1.5 million euros for computers!!! And ordinary working folk are asked to pay the price," wrote Troktiko news blog.

"Symbolism is very important for people, especially at this time, but it won't solve the problem. The way the whole country works must change," Ifantis said.

What lies ahead is the need to overhaul an economy heavily dependent on the state and cut thousands of public servants hired not for real need but to secure votes, at a time when unemployment has hit a six year high of 11.3 percent.

Unions have staged crippling strikes defending their turf but Greeks are beginning to realise they have been living beyond their means and to admit some benefits are absurd -- such as unmarried daughters collecting their dead parents' pensions.

A split between private and public sector workers has also emerged, with increasing anger against public servants who are seen as getting too much and doing too little.

Taking advantage of these divides, addressing the need for retribution and staying clear of public relations blunders will help deliver the bitter medicine with the minimum public reaction, analysts say.

"Papandreou faces a fight within his own party as well as more generally on the political front. He will have problems carrying the Greek people with him but he still could do this. When you come down to it, what are the alternatives," said Chris Pryce of Fitch Ratings.

(Additional reporting by Renee Maltezou and Ingrid Melander; Editing by Dominic Evans)