Patience with Greece is wearing thin in Europe. On Monday, Chancellor Merkel became just the latest EU leader to demand quick action from Athens. But talks on additional austerity measures there continue to go nowhere despite the looming threat of bankruptcy. Greek politicians, after all, must answer to their voters.
German Chancellor Angela Merkel is losing her patience. It is time, she said during a joint Monday press conference with French President Nicolas Sarkozy, for Athens to finally accept the tough austerity measures being demanded as a condition for a second, €130 billion bailout package for the ailing country. Should Greece reject the demands she hinted, insolvency and an exit from the euro zone could come quickly.
“We want Greece to stay in the euro zone,” Merkel told reporters in Paris. But, she then added, “I want to make clear once again that there can beno deal if the troika proposals are not implemented. They are on the table, time is of the essence. Something needs to happen quickly.””Our Greek friends must fulfil their responsibilities,” Sakorzy added. “They have no choice.”
In addition to heaping pressure on Greece, Merkel and Sarkozy on Monday called for the creation of a fund into which all Greek revenues would be paid. The idea is to ensure that the country makes interest payments on its massive debt. The fund would prioritize such payments above other state expenditures.
The sharp rhetoric on Greece’s debt situation comes as leaders of the country’s leading political parties remain deadlocked despite looming insolvency and a €14.5 billion bond repayment in mid-March. The troika — made up of the European Commission, the International Monetary Fund and the European Central Bank — has asked that, in exchange for the bailout, Athens impose yet more wage and pension reductions, public sector job cuts, a reduced minimum wage and tougher tax enforcement measures.
While the leaders of the socialist PASOK, the conservative party New Democracy and the far-right Popular Orthodox Rally have found common ground on many of the belt-tightening measures, disagreement continues regarding details and implementation. And with the Greek population growing increasingly opposed to further austerity — and elections looming as early as April — political pressures are likewise not insignificant.
Greece’s creditors, said New Democracy leader Antonis Samaras as he left the Sunday night meeting, “are asking for more recession, which the country cannot bear. I am fighting with all my means to prevent this.” Popular Orthodox Rally leader Giorgos Karatzaferis said “I will not contribute to the breakout of a revolution by the new poor that will consume the whole of Europe.”
Karatzaferis can perhaps be forgiven for a bit of political hyperbole. Greeks are becoming increasingly hopeless and fear that things are almost sure to get much, much worse. Strikes — often accompanied by street violence — have become commonplace, with another general strike scheduled for Tuesday to protest further public sector cuts. Meanwhile, despite having for the last two years been living off a €110 billion bailout package passed in 2010, the Greek debt just continues to grow. Recent calculations indicate that the bailout package currently under discussion may even be too small and that the country’s actual funding needs are as high as €145 billion through 2014.
In addition to political wrangling over austerity, the Greek government is also still in talks with its institutional creditors over the details of a debt relief plan aimed at lopping €100 billion off of Greece’s overall mountain of debt. European Union leaders had asked European banks and other holders of Greek bonds to accept a 50 percent debt cut in order to ward off an uncontrolled Greek bankruptcy.
Those talks too have been largely stalled recently despite repeated efforts to reach a deal. Both Greek Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos met with Charles Dallara, head of the Institute of International Finance, which is negotiating on behalf of the banks, on Sunday. Deutsche Bank CEO Josef Ackermann and Jean Lemierre of BNP Paribas were also part of those talks. More meetings were scheduled for Monday.
The debt haircut will involve a bond exchange in which creditors receive new bonds worth half of their old ones in addition to lower interest payments. Exactly what those new interest rates would be has been a key sticking point. Ultimately, it has been reported, the two measures together will involve private bondholders swallowing a 70 percent cut in the value of their investments.Many had thought that both agreements might be reached on Monday. A spokesman for the PASOK party said on Sunday that the parties had been asked to give their answers to the austerity package by noon local time today. Later, a Greek official countered that version, saying “No. There is no deadline.”
European Commission spokesman Amadeu Altafaj Tardio’s response was resigned. “We have gone beyond the deadline already,” he said. He then added when he thought an agreement should come: “Around now,” he said.