Death-dance continues in Brussels as Greece keeps spinning out of control

Tue, Nov 13, 2012, 00:00

ANALYSIS:The objective remains to finally pull Greece back from the edge of the fiscal precipice.

But as finance ministers gathered in Brussels for their meeting last night, preparations were already in train for yet more talks this week.

If this is as vivid an illustration as any of the intractable problems thrown up by the debacle, the latest phase of the saga brings Athens back into the last-minute zone.

That this comes after months of endless delay over the release of another €31 billion to avert an uncontrolled default by Athens is all the more telling.

In recent days besieged Greek MPs have voted on a swingeing budget for next year and endorsed a €13.5 billion package of cuts and tax hikes.

Premier Antonis Samaras has just about managed to keep his bruised coalition behind the new rescue plan, but the political difficulties are acute: tens of thousands of protesters thronged Syntagma Square last week.

But for all the pain endured by the Greek people, Europe is still not yet ready to release the money their country requires to prevent disaster. Samaras needs the €31 billion very soon, and he has a €5 billion short-term debt to redeem next Friday. Not even these enormous sums of money will be suffice to get Greece back on track.

One of the main items for discussion last night was a new report by the EU-ECB-IMF troika which suggests the country would need another €32.6 billion if it is to be given two more years to tame the budget deficit between 2014 and 2016. Ministers are in a mood to grant the extra time but not to pay for it.

In spite of the increased urgency, the obligation on cash-strapped contributor countries to seek parliamentary approval for any such scheme helps explain the ministers’ reluctance to rush. Three years since the first Greek explosion, the country’s public debt is still spiralling out of control. Donor fatigue set in long ago.

An hours-long negotiation into the small hours of the morning would not be enough for the ministers to solve the riddle last night. Hence the talk of another meeting before this one even got going. Some speak of a conclave tomorrow, others of Thursday.

Problems abound. Although the troika’s debt sustainability analysis is still awaited, the increasing mountain has raised questions over the power of the IMF to keep lending to Athens without breaking its own rules.

This, in turn, has prompted a push in IMF circles for a second debt-restructuring exercise, this time with official (or public) lenders on the hook instead of the private investors who were tapped last February. But euro zone leaders are reluctant to bear losses on their existing receivables in much the same way as they don’t want to grant additional new loans to Athens.

There is talk of new measures to reduce the burden of servicing the Greek debt, with longer maturities and almost no interest charges, but these alone will not do the deed.

The death-dance continues.

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