Riot Police clash with Greek protesters outside the Parliament building on February 7, 2012. The economic crisis in Greece has brought about the imposition of austerity., a photo by Pan-African News Wire File Photos on Flickr.
Greece, Troika Work on Final Rescue Draft
By Maria Petrakis, Natalie Weeks and Marcus Bensasson
Feb 7, 2012
Greek Prime Minister Lucas Papademos postponed a meeting with heads of the political parties supporting his caretaker government a second time in as many days as the government and international creditors haggled over terms to secure a second aid package.
Papademos will meet with the leaders in Athens tomorrow, instead of tonight as previously scheduled, a spokeswoman for his office said. Instead, he will meet tonight with the so- called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, to put the final touches to terms required for a 130 billion-euro ($172 billion) rescue package, the spokeswoman said.
The delay is yet another hitch in completing a package that’s been on the table since July as the government struggles to wind up financing to avert a collapse of the economy, risking a new round of contagion in the euro area. With the country facing a 14.5 billion-euro bond payment on March 20, German Chancellor Angela Merkel warned yesterday that “time is running out” to reach an accord.
A Greek official said earlier the government and international creditors were close to a final draft of an agreement on budget and structural measures needed to extend the financial lifeline.
While the prime minister and party chiefs have agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors for the rescue. Unions, which struck today, have derided the conditions as “blackmail.”
“It is clear we are going into another drama for Greece with many questions unanswered,” Patrick Legland, head of research at Societe Generale SA, told Bloomberg Television today. “It’s kind of a catch-22 where they have to reduce their deficit but there is no growth. It’s very tricky.”
At stake is whether Greece wins the bailout, secures a debt write-off with private creditors and remains in the euro region. Finance Minister Evangelos Venizelos told reporters late yesterday that “failure of these talks, failure of the plan, the country’s bankruptcy, means even greater sacrifice.”
The euro rose 0.9 percent to $1.3254 at 10:16 p.m. Athens time after touching $1.3270, the highest level since Dec. 12. The Stoxx Europe 600 Index slipped 0.3 percent.
With elections due as early as April, Greek political leaders are arguing over demands such ensuring the viability of pension funds and reducing wage- and non-wage costs to boost competitiveness. Greece still needs to agree on 600 million euros of fiscal measures for 2012, a government official told reporters in Athens today.
Efforts to win a second bailout from the troika have hung in the balance over the past five days as negotiations in Athens failed to clinch an agreement on measures demanded by lenders, which may include a cut in the minimum wage, lower pensions and immediate layoffs for as many as 15,000 state employees.
Citigroup Inc. raised the probability that Greece will be forced to leave the euro area in the next 18 months to 50 percent from 25 percent to 30 percent previously.
Merkel said today that the impact of a Greek exit from the euro would be “incalculable,” and restated her determination to keep Greece in the single currency region.
“I don’t want Greece to leave the euro and therefore the question doesn’t arise,” Merkel said in a speech in Berlin. “I won’t take part in any effort to push Greece out of the euro. It would have incalculable consequences.”
Even so, Merkel said that there is “no way around” Greece carrying out reforms. Greece is in a “very complicated situation”, she said.
Adding to pressure on Papademos and political leaders jostling ahead of the elections, about 10,000 people marched through the capital after the biggest public-sector and private- sector union groups, ADEDY and GSEE, held a 24-hour general strike. The walkout shut down government services, courts, schools, museums and ferry services. Dockworkers and bank employees also walked off the job.
The troika argues that lower wage costs and pension cuts are among reforms necessary to boost competitiveness in the country. Those opposed say the cuts would deepen the country’s recession, now in its fifth year.
Antonis Samaras, the head of the second-biggest party, New Democracy, has indicated he will oppose measures that will deepen the country’s downturn. George Karatzaferis, the head of Laos, one of the three supporting Papademos, said he would seek assurances that the measures would lead the country out of the crisis and said the “aggressive humiliation” of Greece is unacceptable.
Guarantees from Greek political leaders such as Samaras, who leads in opinion polls, are key to securing the funds from the EU and IMF. International lenders want assurances that whoever wins the next election will stick to pledges made now to receive financing.
Samaras’s party has 31 percent support from voters, according to a Public Issue poll released today, compared with 8 percent for the socialist Pasok party, which is the biggest party in the current parliament. The survey of 1,002 Greeks showed a growing number of Greeks wanting elections immediately and waning support both for Papademos and the three parties that back him.
The rescue blueprint includes a loss of more than 70 percent for bondholders in a voluntary debt exchange that will slice 100 billion euros off 200 billion euros of privately-held Greek debt and loans that will probably exceed the 130 billion euros now on the table.
Papademos met tonight for “constructive” talks with Charles Dallara, managing director of the International Institute of Finance, which has negotiated the terms of the swap and Deutsche Bank AG Chairman Joseph Ackermann, according to an IIF statement.
A formal offer for the debt swap must be made by Feb. 13 to allow all procedures to be completed before the March 20 bond comes due. Parliament may be called to vote on the terms of the writedown on Feb. 12, state-runs Athens News Agency reported, without saying how it got the information.
Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds in the exchange, said a person familiar with the talks, who declined to be identified because a final deal hasn’t been struck yet.
To contact the reporters on this story: Maria Petrakis in Athens at firstname.lastname@example.org; Marcus Bensasson in Athens at email@example.com; Natalie Weeks in Athens at firstname.lastname@example.org
To contact the editors responsible for this story: James Hertling at email@example.com; Stephen Foxwell at firstname.lastname@example.org