Greek PM presses for deal on EU loan
Greece reacted with dismay Wednesday after European finance ministers failed to agree to release vital rescue loans, with the prime minister warning that the stakes are higher than just his debt-ridden country's future.
After 12 hours of debate, finance ministers from the 17 European Union countries that use the euro, together with the International Monetary Fund and European Central Bank, had no deal on Greece's financing.
The impasse follows another fruitless meeting last week and highlights the depth of divisions 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.
"Our partners, along with the IMF, also must do what they have undertaken." The ministers are to convene again next Monday.
But Greece is already living on borrowed time. Faced with €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 €7 billion ($9 billion) in redemptions — unless the loans come through.
"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's fortunes are inextricably tied to the rest of the eurozone. Without the bailout funds that have been keeping it afloat since May 2010, the country would default and could end up having to leave the eurozone.
This could have a knock-on effect on other financially troubled eurozone nations, with investors pulling their money out of those countries too, or demanding higher returns to keep it there.
"Europe finds itself before the dead end that its political choices have created," said Alexis Tsipras, head of the main opposition Radical Left, or Syriza, party.
"Day by day it is confirmed that the path of (the bailouts) is catastrophic for the European structure and painful for the people of Europe."
German Chancellor Angela Merkel, whose country is the single largest contributor to Greece's bailout, indicated that a solution was not assured even on Monday.
"I think there are chances — one does not know, but there are chances — of having a solution on Monday," she told lawmakers in Berlin during a speech to Parliament on her country's budget.
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 €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 €44.6 billion.
But there has been disagreement among the eurozone's ministers and the IMF on how to make Athens' debt manageable.
Greek stocks close higher
The eurozone ministers are in favor of giving Greece an extra two years, to 2022, to bring its debt down to 120 per cent of gross domestic product from the 176 per cent forecast for this year. The IMF has resisted such an extension.
One of the reasons Greece is struggling to meet that debt deadline is that its reforms program has been delayed by political uncertainty spanning two elections in the Spring and by a savage recession.
Recognizing that Greece is unlikely to complete its program of austerity measures and budget deficit cuts by 2014, eurozone countries have given the country another two years, to 2016, to complete those reforms.
But the extensions, both on the austerity program and the debt reduction target, would cost more money since Greece's debt would have to be financed over a longer period.
The troika estimates that, including the extensions, Greece will need an extra €31.6 billion through 2016. Eurozone countries agree that the gap should be filled largely by Greece buying back debt from the country's private investors, German Finance Minister Wolfgang Schaeuble told reporters in Berlin.
He noted that Greek bonds are trading at about 30 per cent of their face value on the market. Greece's private investors have already agreed to a debt reduction plan which saw up to 50 per cent wiped off the value of their investments.
"If those are bought, we can reduce the overall indebtedness significantly — however, in order to do that, we need extra financing," Schaeuble said.
Schaeuble estimated that up to €10 billion is needed to finance the planned debt buyback. Some countries want to get the extra financing by reducing the interest rates they charge the country, he said, but Germany would prefer to increase the temporary eurozone rescue fund's program for Greece.
Greek stocks fell more than three per cent at the open but the general share index recovered to close with a gain of 1.1 per cent.