Greek PM Papandreou rules out snap elections (Reuters)

ATHENS (Reuters) – Greek Prime Minister George Papandreou Saturday ruled out snap elections and said his government would succeed in bringing Greece out of the crisis by the end of his term in 2013.

Papandreou's socialist PASOK party is trailing in opinion polls and the government is facing a tough autumn as it tries to implement unpopular austerity measures to secure more EU/IMF funds.

"Citizens will judge us in 2013," Papandreou told members of his party at a conference marking its 37th anniversary.

"By then, we will have achieved bringing Greece out of the crisis and will have completed so many and important reforms," he said.

Political analysts see snap elections in the horizon and say the next few months are critical for the government as Greeks return from summer holidays to tougher austerity measures.

The government must also convince disgruntled lawmakers and an angry public that belt-tightening will pay off.

The government's failure to meet the fiscal targets set by its international lenders is also complicating Papandreou's task.

An official close to the inspectors said late Thursday that the 2011 budget deficit will be at least 8.6 percent of GDP, compared to a target of 7.6 percent.

Friday, Greece and an inspection EU/IMF team interrupted talks on a new aid tranche after disagreeing over why Athens has fallen behind schedule in cutting its budget deficit. Discussions are due to resume on Sept 14.

(Reporting by Angeliki Koutantou; Editing by Karolina Tagaris)

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Spain's embattled premier calls early elections (AP)

By ALAN CLENDENNING and HAROLD HECKLE, Associated Press Alan Clendenning And Harold Heckle, Associated Press – 2?hrs?57?mins?ago

MADRID – Spanish Prime Minister Jose Luis Rodriguez Zapatero on Friday announced early general elections in November, scheduling the race four months earlier than anticipated to give his Socialist Party a better chance to stay in power amid growing outrage over the nation's economic woes.

Zapatero set the election date for Nov. 20 even though he was not required to call elections until March and had resisted repeated calls by the conservative opposition for early polling.

"I want a new government to take control of the economy from January 1st next year," said Zapatero, who announced earlier this year he would not seek a third term.

"It is convenient to hold elections this fall so a new government can take charge of the economy in 2012, fresh from the balloting," he said.

The early elections are expected to help the Socialist Party candidate, Alfredo Perez Rubalcaba, Zapatero's former Interior Minister. While the Socialists have trailed Popular Party candidate Mariano Rajoy, a poll released Wednesday suggested they are closing the gap.

The miserable state of the economy is the single largest concern in Spain — hours before Zapatero's announcement, ratings agency Moody's warned it could soon downgrade the country's credit rating.

Investors are asking for higher rates to lend money to Spain, raising fears that it could be next in Europe to require a rescue package.

And a nationwide malaise has set in, with highly educated young Spaniards dumbing down their resumes because they are overqualified for what jobs are available — and increasingly looking to move abroad as unwilling expatriates.

The country's biggest international companies, including telecommunications firm Telefonica SA and Banco Santander SA, are increasingly relying on branches in booming Latin America while their Spain businesses dwindle.

"The only solution is to leave Spain, but that is a shame," said 25-year-old Monica Lopez, a college journalism graduate forced to work in a low level administrative post at a debt collector's office before she was laid off. "I am completely fed up.

The discontent is due not only to unemployment — at a eurozone-record of 20.9 percent — but also the austerity cuts enforced by Zapatero in the hope of reassuring markets that Spain can avoid needing a rescue package like neighboring Portugal.

The government lifted the retirement age to 67, hiked taxes, cut wages for public sector workers like teachers and police and forced mergers of troubled banks holding billions in unpaid mortgages.

Large anti-austerity protests have mushroomed around the country in recent months, mainly from young demonstrators ages 16-29 who face a stunning 35 percent joblessness rate.

There is not doubt the Socialists are under pressure. They hold a minority in Parliament, have just barely managed to rule through alliances with a handful of small parties, and were trounced in nationwide regional and municipal elections in May.

Rajoy claimed the announcement as a victory for himself, insisting Spaniards have had enough of the economic policies of Zapatero and his administration.

"Early elections are what the majority of the electorate wanted, so this is good news," Rajoy said.

Rajoy isn't expected to map out his campaign platform on the economy until September, but has said he favors labor reforms beyond what Zapatero has pushed through to try to help small and medium sized businesses start growing again. He said he has no intention of making further cuts to Spain's social welfare system and would govern from the center, but offered no details.

New polls showed that early elections are "the least bad" moment for Zapatero's party to try to retain control, said Ramon Cotarelo, a political science professor at Spain's Open University.

Adding to Spain's economic woes, Moody's warned Friday it may downgrade Spain's credit rating because of the country's weak economic growth prospects and high debt.

The move was a further sign that last week's bailout of Greece has not ended fears of debt crisis contagion elsewhere in Europe. Spain has the eurozone's fourth largest economy, and many economists say Europe can't afford to bail out the country.

Moody's said funding pressures on Spain are likely to increase following last week's bailout package for Greece, which has set the "precedent" of asking the private sector to take some losses on their investments in government bonds. Banks are being asked to rollover and swap their Greek debt holdings in an effort to relieve the burden on the country.

Moody's said Greece's second bailout package "has signaled a clear shift in risk for bondholders of countries with high debt burdens or large budget deficits."

Spain is struggling with the aftermath of a collapsed real-estate boom, and experts are predicting years of sluggish growth ahead. Though Spain's debt burden is not as high as Greece's, the country has a fairly sizable budget deficit, which requires constant funding in the bond markets.

The cost of borrowing for that funding has increased sharply in recent weeks, and continued to rise after last week's Greek deal, which was also aimed at easing pressure on the larger economies of Spain and Italy.

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Iain Sullivan contributed from Madrid, and Pan Pylas contributed from London.

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Party of ousted PM's sister wins Thai elections (AP)

BANGKOK – The sister of exiled former Prime Minister Thaksin Shinawatra led Thailand's main opposition party to a landslide victory in elections Sunday, heralding an extraordinary political turnaround five tumultuous years after her fugitive billionaire brother was toppled in an army coup.

The vote paves the way for 44-year-old Yingluck Shinawatra, who has never held office, to become this Southeast Asian kingdom's first female prime minister.

A large mandate to govern could help the new government navigate a way out of the crisis that has plagued Thailand since Thaksin's 2006 overthrow. But the question remains whether the nation's elite power brokers, including the monarchy and the army, would accept the result.

Thaksin was barred from politics in 2007 and convicted on graft charges the next year. The U.S.-educated Yingluck, who he has called "my clone," is widely considered his proxy.

The incumbent premier, Abhisit Vejjajiva, conceded defeat Sunday night and said he was ready to become the opposition.

With 98 percent of the vote counted, preliminary results from the Election Commission indicated Yingluck's Pheu Thai party had a strong lead with 264 of 500 parliament seats, well over the majority needed to form a government. Abhisit's Democrats won 160 seats.

Speaking to a throng of cheering supporters at her party headquarters in Bangkok, Yingluck declined to declare victory until final results are released. But she said: "I don't want to say that Pheu Thai wins today. It's a victory of the people."

In an interview broadcast on the Thai PBS television station, Thaksin called the preliminary outcome "a step forward."

"People are tired of a standstill," he said from the desert emirate of Dubai, where he lives in exile to avoid a two-year prison sentence for graft he says is politically motivated. "They want to see change in a peaceful manner."

Thaksin said he did not feel vengeful and was "ready to forgive all."

After the army toppled Thaksin, controversial court rulings removed two of the pro-Thaksin premiers who followed, one of whom won a 2007 vote intended to restore democracy. That chain of events paved the way for army-backed Abhisit to assume power — ultimately sparking the massive anti-government protests last year which brought Bangkok to its knees, leaving 90 people dead, 1,800 wounded and the glittering city's skyline engulfed in flames.

Army chief Gen. Prayuth Chan-ocha reiterated his vow last week to stay neutral in the vote, dismissing rumors the military would stage another coup.

"The future depends on whether the traditional elite will be willing to accept the voice of the people," Pavin Chachavalpongpun of the Institute of Southeast Asian Studies in Singapore, told The Associated Press.

The more Yingluck's party wins by, he said, "the more stable her government will be, the more difficult it will be for the elite to do anything against it."

The photogenic Yingluck has long been seen as the front-runner in the vote. Her popularity is almost entirely due to fact that she is the proxy of Thaksin.

His ascent to power in 2001 changed Thailand forever, touching off a societal schism between the country's haves and long-silent have-nots. The marginalized rural poor hail his populism, while the elite establishment sees him as a corrupt, autocratic threat to the status quo and even to the revered constitutional monarchy.

That schism has played out through pro- and anti-Thaksin street protests since the 2006 coup. The vote, many believe, is largely about the divisive legacy he left behind.

For a nation of 66 million people known to tourists as "the Land of Smiles," much is at stake.

Last year's demonstrations marked some of the nation's worst violence in two decades and left Thailand's reputation for stability in tatters. Holding the ballot was one of the protesters demands, though they wanted it held last year.

Oxford-educated Abhisit has used his campaign to blame the opposition and its supporters for burning Bangkok last year, saying a vote for Yingluck would be a vote for chaos. He has also declared the poll "the best opportunity to remove the poison of Thaksin from Thailand."

Abhisit and his allies believe Yingluck is plotting Thaksin's return through a proposed amnesty that would apply for political crimes committed since the coup. Yingluck says it is aimed at reconciling all Thais — not just her brother.

Thaksin has vowed to return by year's end, but he said Sunday that "I have to be part of the solution ... I don't want to return and create problems. If that's the case, I don't have to go back yet."

In a concession speech, a pale-faced Abhisit said he would continue to oppose amnesty for Thaksin, but said that "from now on, I want to see reconciliation in society."

Sunai Phasuk, a senior researcher for Human Rights Watch, said the most important challenge facing the incoming government will be resolving the nation's divide.

"Everyone is talking about political deals, but no one is talking about how to end impunity, restore freedom of expression and hold perpetrators accountable no matter how high up they are," Sunai said. "Without that, Thailand will never able to get out of this cycle of violence and turn itself around."

Although Thaksin is credited for awakening what has become a democratic movement among the country's marginalized poor who long stood silent, his opponents say he is no champion of freedom. During his time in office, Thaksin was loudly criticized for a sharp authoritarian streak and stood accused of corruption, cronyism and abuse of power.

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Associated Press writers Grant Peck and Sinfah Tunsarawuth contributed to this report.

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