The leaders of the three parties in Greece’s coalition government are meeting Prime Minister Lucas Papademos to decide if they will agree to the terms of a proposed €130 billion bailout. Papademos have agreed to make further cuts this year equal to 1.5% of gross domestic product, they have yet to agree to measures demanded by creditors for a 130 billion-euro ($171 billion) rescue.
German Chancellor Angela Merkel said “time is running out,” while unions attacked the conditions, describing them as “blackmail.” Greece still needs to agree on €600 million of fiscal measures for 2012, a government official told reporters in Athens yesterday.
A nationwide general strike has been called by the country’s two major umbrella federations, in opposition to the “storm of new measures being advanced by the coalition and the troika". Papademos met overnight with representatives from the European Commission, the European Central Bank and the International Monetary Fund to continue talks on possible spending cuts.
Merkel said in Paris that “I can’t quite understand why we need a few more days.” French President Nicolas Sarkozy said there could be no funds without reforms. Allowing Greece to go bankrupt “isn’t an option,” he said. The measures demanded by lenders, include a cut in the minimum wage, lower pensions and immediate layoffs for state employees.
The troika has asked for 15,000 state jobs to be cut this year, part of plans by Greece to gradually phase out 150,000 employees by the end of 2015. The rescue blueprint includes a loss of more than 70 percent for bondholders in a voluntary debt exchange.
Greece’s economy shrank 6 percent last year, according to the most recent IMF estimates, the budget deficit is still close to 10 percent of GDP and unemployment is about 18 percent.
The only way out for Greece is “a reduction in debt, progress on wages, on labor costs and the commitment by the Europeans to extend funds for as long as it’s needed,” International Monetary Fund chief economist Olivier Blanchard said in Washington yesterday. “Under these three conditions it’s still a terribly ugly and unpleasant path but it is at least one which can be tried.”
Papademos Seeks Greek Consensus on Cuts By Maria Petrakis, Marcus Bensasson and Natalie Weeks Bloomberg, Feb 7, 2012 – http://www.bloomberg.com/news/2012-02-06/papademos-meets-creditors-as-sacrifice-looms-for-greece-to-stay-in-euro.html
Wrangling over Greece’s bailout to continue, RTE News, Tuesday, 7 February 2012 -http://www.rte.ie/news/2012/0207/greece.html
Nationwide general strike on Tuesday, Athens News, 6th February, 2011 – http://www.athensnews.gr/portal/1/53063