Finance ministers of the 17-nation eurozone meeting in Brussels warned there would be no immediate approval for the rescue package and said Athens must prove itself first. Jean-Claude Juncker, who chairs the Eurogroup, set three conditions, saying the Greek parliament must ratify the package when it meets on Sunday and a further 325 million euros of spending reductions needed to be identified by next Wednesday, after which eurozone finance ministers would meet again. “Thirdly, we would need to obtain strong political assurances from the leaders of the coalition parties on the implementation of the program,” Juncker told a news conference after six hours of talks in Brussels. “Those elements need to be in place before we can take decisions.” “In short, no disbursement before implementation.”
Facing elections as soon as April, Greece’s party leaders have been loath to accept the lenders’ tough conditions, which are certain to be unpopular with increasingly angry voters. Greek Finance Minister Evangelos Venizelos left the Brussels talks quickly, telling reporters Greece faced a choice of staying in the euro or leaving. “Until the next Eurogroup, which will most likely convene on Wednesday, our country, our people should think and make a final strategic choice,” he said, saying a critical decision needed to be made over private sector bondholder losses (PSI). “If we see the future of our country within the eurozone, within Europe, we should do what we have to do for the program to be approved and for the PSI to be concluded on time before major bonds expire in March.” The Greek government called on the coalition parties to support the deal when it comes to parliament, saying the Brussels meeting showed they were only half way there. “The first step is for parliament to approve it, showing political parties’ commitment to the targets and the policies of the new economic program. It’s time all of us to assume their responsibilities. We need action, not words,” government spokesman Pantelis Kapsis said in a statement.
Venizelos said Athens also had an outline deal with private creditors on a bond swap in which they would give up some 70 percent of the value of their Greek bond holdings, reducing Athens’ 350 billion-euro debt pile by about 100 billion euros. ECB President Mario Draghi said he was “quite confident” that all the components of a Greek debt deal would fall into place and hinted the central bank could provide indirect help without breaching a treaty ban on financing governments. Athens now must get all elements in place, including the parliamentary approval, within six days.
The measures will mean a big fall in the living standards of many Greeks, now in the fifth year of a deep recession. Deputy Labour Minister Yannis Koutsoukos, a socialist, resigned over a package he said would be “painful fIIor working people”. Greece’s two major labor unions called a 48-hour strike for Friday and Saturday against the reforms. “The painful measures that create misery for the youth, the unemployed and pensioners do not leave us much room,” secretary general of the ADEDY union, Ilias Iliopoulos, told Reuters. “We won’t accept them. There will be a social uprising.”
Greece has fallen deeper into recession since it received a first bailout in May 2010. Latest unemployment figures showed the jobless rate hit a record 20.9 percent in November, with youth unemployment a staggering 48 percent. The sharper-than-forecast contraction has opened a funding gap of about 15 billion euros in the bailout package agreed last October to bring Greece’s debt down to about 120 percent of gross domestic product from nearly 160 percent today. Two sources said the government would promise spending cuts and tax rises worth 13 billion euros from 2012 to 2015, almost double the seven billion originally pledged. To help fill the remaining gap, Athens has urged the ECB to forego profits on its Greek bond holdings in a move that could raise 12 billion euros or more.
Portugal bailout adjustment
In the meantime, Germany’s finance minister has been caught on tape telling his Portuguese counterpart that the country’s bailout program may have to be revised once a second bailout for Greece has been agreed. Wolfgang Schaeuble’s comments, caught on tape at the meeting with other eurozone ministers, are the first acknowledgment from a high-level euro official that Portugal may need more time and money to get its economy back in track. The recording was later posted on YouTube. Lisbon received a 78 billion euro bailout last April and has since fallen into a deep recession. Schaeuble can be heard telling Portuguese Finance Minister Vitor Gaspar that “We need an adjustment of the program (for Portugal) after substantial decisions on Greece.”
