Greece still waits for cash despite austerity vote
Greece's euro partners won't be able to release the country's next batch of bailout cash next week, even though the Greek Parliament narrowly backed more unpopular austerity measures Thursday.
Germany's Finance Minister Wolfgang Schaeuble said the 17-country eurozone is not yet in a position to make a decision on releasing the funds, as many in Athens may have hoped.
As anticipated, the cash-strapped country still has to pass its budget for 2013 while lawmakers in some countries, including Germany, have to authorize the release of funds.
"We're not there yet," Schaeuble said in Hamburg. "I don't see how we would get to a decision next week," he said, referring to the meeting of the eurozone finance ministers on Monday.
"Not all is lost, but not all is won." The approval of the austerity bill, which will further cut salaries and pensions and increase taxes, was the key step towards persuading Greece's international creditors to release the next €31.5 billion ($40.6 billion Cdn) installment of the country's vital bailout loans.
Without it, the government has said the country will start running out of cash on Nov. 16, paving the way to Greece's potential bankruptcy and exit from the euro. That scenario has kept financial markets on edge for the past three years.
However, Germany, the biggest single contributor to Europe's bailouts, has insisted Greece must first pass its 2013 budget to create the basis on which the country's creditors can make a decision to release the new funds.
After the budget vote, which is scheduled for Sunday, the release of the funds still hinges on a report by the so-called troika of debt inspectors from the European Union, IMF and European Central bank which is not expected to be ready in time for the Monday meeting.
In addition, some euro countries such as Germany can only give the go-ahead after their own Parliaments have voted on it. Though those votes are not expected to take much time, they add the prospect of further delay.
Interim deal may be needed
Schaeuble's comments strongly suggest an interim financial arrangement for Greece may have to be agreed. Sunday's budget vote in Athens represents another test to the coalition government of Antonis Samaras.
Thursday's vote in favor of the €13.5 billion austerity package came at a cost for the fragile three-party coalition government. Lawmakers voted 153-128 for the package, hours after more than 80,000 protesters demonstrated outside in Athens —some fighting running battles with riot police.
Only two — the majority conservatives and the Socialists — of the three parties in the coalition backed the package. But there was also dissent in those ranks, with seven lawmakers expelled for failing to back the measures, and an eighth saying he was leaving the Socialists to continue as an independent member of parliament.
Nevertheless, the government is not in imminent threat as the third party, the Democratic Left, which abstained from the austerity vote, insists it will continue as a coalition member.
The three parties are expected to present a united front in the budget vote.
Greece has relied on rescue loans from its euro partners and the International Monetary Fund since 2010. In return, it has had to implement a series of austerity measures which have hit the economy hard.
Greece is set to enter its sixth straight year of recession. Figures Thursday showed unemployment figures up at 25.4 per cent in August, increasing from 24.8 per cent in July and 18.4 per cent the year before.
More than 1.2 million people in this country of barely 10 million are now unemployed, with 58 per cent of all young people aged 15-24 are unemployed. Greece's €240 billion bailout package is released in installments and is dependent on prescribed budget targets and reforms.
The latest payment has been delayed for five months, due to political uncertainty in the spring that forced two national elections in as many months and subsequent delays in agreeing on the new cutbacks.
ECB done helping Greece
Facing a sixth year of recession, the government has been seeking better terms for its bailout agreement — mainly a two-year extension to meet the agreed targets.
That, however, would create a financing gap of up to an estimated €30 billion. ECB chief Mario Draghi made it clear that those funds would have to come from the eurozone governments, saying the central bank "is by and large done" with helping the country because it is not allowed to finance the debt of its member nations.
Schaeuble, meanwhile, acknowledged the Greek government's progress "despite the protests and the general strike" but he also cautioned that more needs to be done to get its finances under control.
Broad-circulation newspaper Ta Nea daily said in an editorial that Athens must now ensure it receives the new bailout payment in time, and kick start the economy.
"Nobody can imagine that in four months' time (Greece's creditors) will be demanding new salary and pension cuts," the paper said.
"Greece cannot take it — and in any case the government will not survive it."
Police in Athens arrested five suspected rioters during the clashes outside Parliament on Wednesday night, on the second day of a nationwide general strike.
Unions have pledged to hold new strikes and protests, and on Thursday taxi drivers and Athens metro, tram and urban rail workers walked off the job.