Former Greek PM attacks successor as Socialist rifts deepen

ATHENS Sat Nov 10, 2012 1:35pm GMT

Former Greek Prime Minister George Papandreou talks to the media as he arrives at a meeting of the Party of European Socialists (PES) ahead of an informal EU leaders summit in Brussels May 23, 2012. REUTERS/Ezequiel Scagnetti

Former Greek Prime Minister George Papandreou talks to the media as he arrives at a meeting of the Party of European Socialists (PES) ahead of an informal EU leaders summit in Brussels May 23, 2012.

Credit: Reuters/Ezequiel Scagnetti

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ATHENS (Reuters) - The man who led Greece into the euro has attacked former Prime Minister George Papandreou's handling of the debt crisis, adding to infighting threatening the Socialist Party's position in the ruling coalition.

Costas Simitis, who was prime minister from 1996 to 2004 and ushered the country into the single currency in 2001, said in a new book that the government of his former ally and fellow Socialist was naive and incompetent when the crisis erupted in late 2009.

"It was not up to the task," Simitis wrote in his book called "Derailment". "It reacted late, without due preparation... It held utopian positions, such as the limitless and unchecked issuing of (joint) euro bonds."

The attack on Papandreou, who still wields behind-the-scenes influence in what was once Greece's largest political movement, came as the Socialist Party is in turmoil.

Current Socialist leader Evangelos Venizelos earlier this week ejected six of the party's 33 deputies from its parliamentary group for failing to back an austerity package. The resignation of another deputy from the Socialists on Thursday reduced the three-party coalition's majority to 18 in the 300-seat assembly.

A copy of "Derailment", due to be released next week, was obtained by Reuters on Saturday.

Papandreou's staff was not experienced enough to cope with the crisis, said Simitis. "His advisors, more numerous than those by any other prime minister, formed different teams which did not coordinate and were antagonistic to each other," he said.

Papandreou's finance minister, George Papaconstantinou, wrongly rejected a debt restructuring, Simitis said.

"The government was insisting that the debt was viable and that developments were favourable," he wrote.

Greece's deficit and debt spiralled out of control after the global financial crisis. Athens has had to be rescued twice by the European Union and the International Monetary Fund since 2010 to avert a chain reaction that threatened the euro itself.

With total Greek debt estimated at 175 percent of gross domestic product and forecast to rise to nearly 190 percent next year, euro zone finance ministers will meet on Monday to try to determine just how off-track Greece is and how to respond.

Disagreement over the state of its future finances threatens to further delay the next 31.5 billion euro-tranche of Greece's second bailout, pushing it close to bankruptcy.

Simitis also accused the European Commission of turning a blind eye to overspending by his conservative successor, Costas Karamanlis.

During his government, Simitis reduced the budget deficit and public debt to make Athens qualify for euro zone membership.

But the Karamanlis government and German media accused him of faking the country's fiscal figures to adopt the single currency, with the connivance of other European leaders at the time such as German Chancellor Gerhard Schroeder.

Simitis rejected that charge. "This accusation ignores the facts," he wrote in the book. A debt swap he conducted with Goldman Sachs in 2001 was also common practice among European governments at the time, he said.

(Writing by Harry Papachristou; editing by Jason Webb)

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