Greek political leaders had clinched a deal on economic reforms and spending cuts needed to secure a second bailout, but eurozone finance ministers demanded more measures and a parliamentary seal of approval before providing the aid.
The European Union and the International Monetary Fund have been exasperated for weeks of wrangling over the terms of a 130 billion euro ($172 billion) bailout, with time running out to avoid a default.
Finance ministers of the 17-nation euro zone 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 tomorrow and a further 325 million euros of spending reductions needed to be identified by next Wednesday, after which euro zone 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 needs to be in place before we can take decisions. In short, no disbursement before implementation.”
Finance Minister Evangelos Venizelos has told Greece’s political parties that they will have to take a clear decision on whether they want the country to remain in the euro or not by the time the Eurogroup meets again next week.
Speaking late on Thursday in Brussels following the end of the Eurogroup meeting, Venizelos said that Greek politicians had a “historic responsibility” to live up to over the next few days.
The new loan agreement was due to be submitted to the Greek Parliament yesterday for MPs to vote for or against it, on Sunday. Venizelos said a clear decision would be needed by February 15.
“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 euro zone, within Europe, we should do what we have to do for the programme to be approved and for the PSI to be concluded on time before major bonds expire in March.”
The coalition government has 252 of 300 seats in Parliament and it is expected that the loan deal will pass through the House comfortably. However, the agreement contains a number of unpopular measures, such as the 22 percent reduction to the minimum wage, and some coalition MPs already said they will vote against the agreement.
It is also not clear what position the right-wing Popular Orthodox Rally (LAOS) will take. “Nobody can hide behind anyone else,” said Venizelos.
“Nobody can keep pretending to be the good guy. Our choice will be between sacrifices and even bigger sacrifices.
“There are no easy choices and demagoguery is over,” added the finance minister in what appeared to be a thinly veiled attack on New Democracy leader Antonis Samaras, who had earlier made a televised address emphasising his desire for more measures that would drive growth in Greece.
The ND leader also reiterated his demand for general elections as soon as possible.
With eurozone leaders demanding an additional 325 million euros of spending reductions the Greek government will have to set out precisely how it will find the savings this year so that pensions are not cut beyond the limit set by Samaras and supported by LAOS leader Giorgos Karatzaferis.
According to Kathimerini these savings will most likely come from extra cuts in military expenditure and the moving forward of reductions in some public sector wages. Venizelos indicated that all commitments on behalf of the political leaders towards the eurozone finance ministers would have to be written commitments.
“We have to make our decisions now,” concluded Mr Venizelos. In the meantime deputy Employment Minister Yiannis Koutsoukos has resigned yesterday over the new drastic austerity measures agreed by the coalition government. In a letter to the government, the 59-year-old former trade union leader said he would not support the “painful” measures that would hurt working Greeks. He did not indicate whether he would back the new austerity reforms in parliament.
Koutsoukos is the first casualty in Prime Minister Lucas Papademos’ three-month-old coalition government, and his walkout is seen as an omen of trouble in the majority Socialist party which has traditionally strong links with unions.
Koutsoukos is a former leader of the civil servants union ADEDY, which is planning various protests and rallies outside parliament today and tomorrow.
Sources: Reuters, Kathimerini
