Belt-tightening not enough, say Greek neighbors
BRUSSELS — Just hours after Greece gave in to painful new job and spending cuts, European ministers declared Thursday that Athens didn’t go far enough and demanded more within a week in exchange for a 130 billion euro ($170 billion) bailout to stave off bankruptcy.
The ministers gave the debt- ridden country until the middle of next week to find an extra 325 million euros ($430 million) in savings, pass the cuts through a divided parliament, and get written guarantees that they will be implemented even after the elections of a new government in April, said Jean- Claude Juncker, the Luxembourg prime minister who chaired Thursday’s meeting of finance chiefs of the 17 euro countries.
The austerity plan, which makes sharp cuts to the minimum wage and thousands of public- sector jobs, ignited fresh criticism from unions and the country’s deputy labor minister, who resigned in protest after Greece agreed to the deal. Even debt inspectors conceded that the new measures would keep the country in a recession for a fifth straight year.
But Greece’s finance min- ister warned that the alternative will likely be worse.
“Unfortunately the choice we face is one of sacrifice or even greater sacrifice — on a scale that cannot be compared,” Evangelos Venizelos told reporters, after the meeting with ministers from the 16 other countries that use the euro.
Other European officials warned that more severe steps still might be necessary.
“Greece still has its homework cut out,” Jan Kees de Jager, the Dutch finance minister, said after the meeting. “A lot of measures need to be clarified and taken.”
A European official said earlier he still saw 10 to 15 issues before the deal could be concluded, including doubts t hat Greece could lower its debt level down to 120 percent of its annual economic output by 2020 and that labor market reforms would restore the country’s competitiveness. The official spoke on condition of anonymity because of the sensitivity of the negotiations.
On top of that, the ministers were seriously considering a plan proposed by France and Germany to force Greece to set up a separate account dedicated to repaying its debt, said Olli Rehn, the EU’E economic affairs commissioner.
Such an account would be an unprecedented intrusion into the fiscal affairs of a sovereign state in Europe. The plan underlines the frustration that has built up in the eurozone over Greece’s
Unfortunately the choice we face is one of sacrifice or even greater sacrifice — on compared.”— a scale that cannot be
slow reforms over the past two years.
Rehn, calling it a “relevant possibility,” did not say whether only money from the bailout would be channeled into the account, or whether it would also contain Greek tax revenue.
Greece is under immense pressure to reach a rescue deal. On March 20, it has to redeem 14.5 billion euros ($ 19.3 billion) in bonds — money which it doesn’t have. The country’s total debt is 350 billion euros ($464 billion) — equivalent to 160 percent of its annual economic output — and unsustainable even for a healthier economy.
Greek Prime Minister Lucas Papademos earlier Thursday said that all major party leaders in the country’s coalition government had backed the latest round of cuts, including a 22 percent cut in the minimum wage, firings of 15,000 civil servants and an end to dozens of job guarantee provisions.
The support of all major parties was a key demand from Greece’s international creditors — but European ministers indicated that they still needed written assurance from the political leaders before Wednesday, when the ministers planned to meet again.
Once all the demands have been fulfilled, the eurozone will give Greece the green light to start implementing a separate bond swap deal with banks and other private investors designed to slice 100 billion euros ($ 132 billion) off Greece’s debt.