Greece‘s political leaders held emergency talks earlier today in another effort to find a consensus on new, harsher austerity measures to pull the country out of its debt crisis and convince sceptical investors it can avoid default. The European Union has demanded cross-party support for the reforms, due to run two years beyond the current government’s mandate to 2015, as it considers more help for the country.
President Karolos Papoulias chaired the nearly four-hour meeting with Socialist Prime Minister George Papandreou, his finance and foreign ministers, and the heads of four opposition parties. Papandreou failed earlier this week to gain broad cross-party support for a drastic 2011-2015 cost-cutting and privatisation plan.
According to sources within New Democracy party, Samaras declined to offer his party’s support of the Memorandum reiterating that it is “incorrect”, while again calling for a renegotiation of the bailout package. Moreover, he reportedly also rejected a proposal by Popular Orthodox Rally (Laos) leader George Karatzaferis for the creation of an “ecumenical government”. Samaras said the latter would be unconstitutional. (Watch the video with his statements here)
All refused to make public statements after the meeting, except Karatzaferis, who commented bitterly that “unfortunately, some people’s ‘seat’ is above Greece”. “The people did not understand that if Evrybiades hadn’t come to an agreement with Themistocles in 480 B.C. that history would have written neither about them nor the date,” he added.
Following the meeting, a 20-minute private meeting between Papoulias and Prime Minister George Papandreou followed, after which the prime minister indicated that he would not call snap elections but “proceed alone” state news agency sources said.
Debt inspectors from the EU, the International Monetary Fund and the European Central Bank, known as the troika, are in Athens to monitor progress on last year’s €110 billion bailout loan deal for Greece, which remains shut out of the bond markets and is facing a potential financing gap in 2012.
The inspectors will determine whether the country is meeting the criteria for the next installment of the bailout, worth €12 billion, to be disbursed. A decision is expected next month. But the crisis took an ominous turn Thursday, when Jean-Claude Juncker, the chairman of the Eurogroup, reportedly said the IMF may have to hold back the next tranche, because the IMF’s loans are contingent on Greece showing what its state financing will be over the next 12 months. Until recently, that was meant to include raising cash on bond markets next year, a move the Greek government has admitted is unlikely as its market borrowing rates remain too high.
Finance Minister George Papakonstantinou has warned that Greece faces default and would be unable to pay salaries and pensions without the next batch of rescue loans.
Asked about Juncker’s comments, German government spokesman Christoph Steegmans replied only: “We are still waiting for the report from the troika mission that is supposed to come between the beginning and middle of June.”
There are fears that with a budget deficit of 10.5 percent of gross domestic product and a debt of more than €342 billion, Greece will not be able to pull through the crisis even with the current bailout package. But opinions diverge radically in what must be done. Some analysts and politicians have advocated a restructuring of debt, where the country would pay creditors either less than the full amount owed or at a later date. But the ECB adamantly opposes such a solution, saying it could spread turmoil through the European banking system. It has even threatened to take the drastic step of cutting off support for Greece’s banks if Athens restructures.
David Mackie, analyst at JP Morgan in London, said Juncker might have been trying to put pressure on Greece to reach a cross-party agreement on economic reforms. He said, however, that European governments would be ready to step in with extra aid. “We do not believe that Greece will be allowed to default in the coming weeks due to a failure to disburse the funds under the current program,” Mackie said.