By Angelika Papamiltiadou
ATHENS (MNI) – Despite some progress, Greece’s Prime Minister Lucas
Papademos and the leaders of three political parties that support his
coalition failed to reach agreement on new deficit cuts and economic
reforms that will clear the way to a second bailout package for the debt
laden country.
Despite the expectation by EU partners that the deal would be
reached by Sunday evening, there were still several points under
discussion when the meeting broke up. The party chiefs will reconvene
with Papademos on Monday in an effort to wrap up an accord.
Upon their departure from Papademos’ office late Sunday, Antonis
Samara, head of the conservative New Democracy Party, and George
Karatzaferis, leader of the small right wing Laos party, gave the
impression that a consensus had not been achieved.
But later on, Papademos’s office issued a written statement, saying
that the leaders had “agreed on a series of primary issues such as
additional new spending cuts equal to 1.5% of GDP in 2012; securing the
viability of social security funding; and boosting competitiveness and
the recapitalization of banks.”
The statement added that the party leaders would “meet again
tomorrow with the prime minister to conclude discussions.”
“For the first time we are negotiating,” Samara said earlier in the
evening. But he added: “They ask us for further recession and the
country cannot sustain it. I am working hard and in every way to avoid
it.”
Karatzaferis said he “will not contribute to the country’s
collapse,” but he did not specify whether he would reject the new
austerity measures.
Although Papademos’ statement speaks of an agreement over spending
cuts worth 1.5% of GDP, it does not mention anything on the proposals
causing the most friction, which include a further reduction of minimum
wage, elimination of the 13th and 14th months of salary, and massive
lay-offs in the public sector.
“These issues were not discussed, despite the fact that they are on
the top of the list for the troika,” a government official told Market
News International, referring to the group of inspectors from the
European Commission, European Central Bank and International Monetary
Fund. The troika is currently in Athens to examine the country’s public
accounts, it progress on promised reforms, and to determine the
magnitude of the financial need to be met by a new bailout plan.
“Hopefully, the party leaders will understand that Greece’s
membership in the Eurozone is really at stake and the danger is greater
than ever,” the government official added.
But Socialist Party leader and former Prime Minister George
Papandreou drafted and published a letter to Papademos saying he
disagreed with the proposed cuts to the minimum wage and elimination of
the 13th and 14th months’ salary.
The clock is ticking for Greece, with a E14.5 billion bond
redemption coming due on March 20 and not enough money to pay for it. An
accord with private sector investors to write off about 70% of the
long-term value of their Greek bond holdings has technically been
completed, but it cannot be formally announced unless Greek authorities
agree with the troika on the new measures.
Until agreement with the troika is completed, the Eurogroup will
not convene and negotiations for the new bailout agreement cannot start.
The new bailout is now expected to reach about E145 billion, up from the
E130 billion initially estimated by EU leaders at their summit in late
October.
If Greece doesn’t secure the new bailout money, it will be unable
to meet one of the primary terms in the private sector debt reduction
agreement, which is a cash payoff equal to 15% of outstanding bonds.
If negotiations drag on, the possibility of a default rises as the
redemption date of March 20 approaches.
Some members of the Eurogroup, including Germany, the Netherlands,
Finland, Austria and Luxembourg, appear reluctant to grant the first
installment of a new bailout package, which would be worth approximately
E30 billion euros. They fear that once Greece got the money, it would
merely continue delaying implementation of the harsh fiscal program
required of it.
Tellingly, Jean-Claude Juncker, the Eurogroup president and Prime
Minister of Luxembourg, spoke of a possible Greek default in an
interview published Sunday in Germany’s Der Spiegel magazine.
He said that Greece should not expect new loans from its partners
if it does not implement the requested measures. And, he said, should
there be indications that things are not working out, the country could
default by March.
Meanwhile, negotiations between the troika and Finance Minister
Evangelos Venizelos continue, as they try to find E4.4 billion in new
measures to offset Greece’s missed 2011 deficit target and a bigger than
expected recession in 2012.
The troika also met for three hours Sunday night with Papademos,
after his meeting with the party leaders.
A senior Greek government official told reporters afterwards that,
“the troika seems to agree that the 13th and 14th [months'] salary
should not be abolished for the time being.” However, “there is a demand
for the further reduction of the minimum wage by 15% to 20% and for
150,000 layoffs in the public sector by 2015,” the official added.
The official said, “party leaders are expected to agree to the new
program tomorrow.”
–Athens Bureau, a_papamiltiadou@hotmail.com
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