Greece reacted with dismay Wednesday to a failure by European finance ministers to agree to release up to (EURO)44 billion ($56 billion) of rescue loans it vitally needs, with the prime minister warning that the stakes are higher than his debt-ridden country's future.
Greece reacted with dismay Wednesday to a failure by European finance ministers to agree to release up to (EURO)44 billion ($56 billion) of rescue loans it vitally needs, with the prime minister warning that the stakes are higher than his debt-ridden country’s future.
After 12 hours of debate into the early hours of Wednesday, finance ministers from the 17 European Union countries that use the euro, together with the International Monetary Fund and European Central Bank, again failed to reach a deal on Greece’s financing. The impasse follows another fruitless meeting last week and highlights the depth of divisions among European governments over how to handle the country’s huge debt problem without reaching deeper into the pockets of their own taxpayers.
“Greece has done what it had to and what it had committed to doing,” Prime Minister Antonis Samaras said in a statement. “Our partners, along with the IMF, also must do what they have undertaken.”
But Greece is already living on borrowed time. Faced with (EURO)5 billion ($6.4 billion) in maturing treasury bills that it couldn’t pay last week, Athens issued more short-term debt to cover the gap and tide it over until it can receive its bailout funds. But most of that was in the form of four-week treasury bills, meaning the country will face the same situation next month – when it has more than (EURO)7 billion ($9 billion) in redemptions – unless the loans come through.
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“It is not just the future of our country, but the stability of the entire eurozone that depends on the successful completion of this effort in the coming days,” Samaras said.
“Whatever technical difficulties (there might be) in finding a technical solution, do not excuse any … delay,” he said.
Greece has been relying on rescue loans from other eurozone countries and the IMF since May 2010, after a massive budget gap and spiraling national debt left investors too wary of buying its bonds on the international market.
In return, the country has had to submit its economy to scrutiny from the so- called troika of the IMF, ECB and European Commission. It has also had to impose several rounds of austerity measures, included repeated salary and pension cuts and increased taxes. The belt-tightening has left Greece mired in a deep recession expected to head into a sixth year. One in four Greek workers are now unemployed, and tens of thousands of small businesses have shut down. The country’s uneasy three-party coalition government recently passed another round of spending cuts through Parliament, a requirement for it to be given the long-delayed next installment of its rescue loans, a (EURO)31.5 billion ($40 billion) batch.
The government also hoped to see outstanding funds from previous loan installments, and a batch originally earmarked for December, bringing the total expected to (EURO)44.6 billion.
But there has been disagreement among the eurozone’s ministers and the IMF on how to make Athens’ debt manageable. The eurozone ministers are in favor of giving Greece an extra two years, to 2022, to bring its debt down to 120 percent of gross domestic product from the 176 percent forecast for this year. The IMF has resisted such an extension.
“The eurozone cannot use Greece as an excuse to justify its failure to deal in an effective, definitive and insightful manner with the various manifestations of the crisis concerning Eurozone as a whole and certainly the vast majority of its members,” said former finance minister Evangelos Venizelos, who now heads one of the two junior coalition parties.
The ministers are to tackle the issue again next week, which forced Samaras to cancel a planned trip to Qatar. Samaras is travelling to Brussels later Wednesday for an EU summit meeting.
Greek stocks fell in response to the delay, with the general share index down 0.8 percent in midday trading – recovering from an opening fall of more than 3 percent.
German Finance Minister Wolfgang Schaeuble said that “Greece has fulfilled its prior actions” and that “we have an improved control mechanism so that it is clear for the future that the reforms will be implemented step by step.” He did not elaborate.
“We now have a series of options on the table regarding how we close the financing gap,” Schaeuble said. “We discussed this intensely but, because the questions are so complicated, we did not reach a conclusive solution and so we will meet again on Monday.”
Norbert Barthle, a senior lawmaker with German Chancellor Angela Merkel’s party, said “it is high time for this issue to be dealt with.”
Germany is the highest single contributor to Greece’s bailout, and rescuing the country has become a contentious political issue there.
Asked on Deutschlandfunk radio whether he expects a breakthrough at next week’s meeting, Barthle replied: “I think the troika will use the time to make calculations, investigate new possibilities, and then hopefully we will come to a conclusion next week.”
He emphasized the vehement opposition in Merkel’s coalition to a second debt writeoff for Greece, arguing that a so-called haircut “would be a fatal signal to Portugal, to Ireland and possibly to Spain,” three other financially troubled eurozone countries.
“They would ask themselves straightaway, why should we … push through tough measures that might lead to the government being voted out if our debts can be written off?”
Geir Moulson contributed from Berlin.