Papandreou's fortunes began to turn during the summer of 1988. In August he underwent major heart surgery, but he refused to yield the reins of power. The opposition mocked his technique as "government by fax." A further complication was the announcement that Papandreou intended to divorce his American wife of thirtyseven years--herself a very popular figure in Greece--in order to marry a thirty-four-year-old airline stewardess who had gained influence in Papandreou's entourage. The family rift caused by this announcement damaged the cohesion within PASOK because Papandreou's sons occupied key positions in the party.

But it was a financial scandal that rocked the political world of Greece most violently. In November 1988, a shortfall of US$132 million was discovered in the Bank of Crete some months after bank chairman Georgios Koskotas, a Greek-American millionaire entrepreneur under investigation for large-scale financial crime, had fled the country. In the months that followed, alleged connections between Koskotas and the PASOK government, and even with Papandreou himself, brought the resignations of several ministers and demands for a vote of no confidence in the government. Papandreou, whose second four-year term was to expire within months, held onto power.