Greece told to execute bailout terms or face bankruptcy

Tue, May 8, 2012, 01:00

GREEK LEADERS have been warned they run the risk of bankrupting the country if they fail to form a government that pledges to fully execute the second EU-IMF bailout plan for the country.

The hard line taken by Germany and the European authorities comes in the face of a general election in which a clear majority of Greeks voted for parties opposed to the austerity measures in the rescue deal.

Although this uncompromising stance has the potential to threaten Greece’s membership of the euro, the EU powers have always sought to avoid expelling the country for fear of triggering market panic and undermining other weakened members of the single currency.

The Greek result, widely held to be a severe setback to the campaign to stabilise the euro zone, overshadowed François Hollande’s election as president of France.

Mr Hollande’s push to renegotiate the fiscal treaty was promptly rejected yesterday by German chancellor Angela Merkel, although most political observers believe a deal to insert measures to promote growth into the treaty is already in prospect.

“We in Germany are of the opinion, and so am I personally, that the fiscal pact is not negotiable. It has been negotiated and has been signed by 25 countries,” the chancellor said.

As the Government reiterated the argument for a Yes vote in the referendum, Tánaiste Eamon Gilmore said there was no question of tearing up the agreement.

“François Hollande has been clear that he supports budgetary discipline,” the Tánaiste said. “He is not talking about dismantling what has been agreed in the treaty but about accompanying that with measures to support growth.”

Amid frantic politicking in Athens, Dr Merkel conceded that the situation was “not uncomplicated” but insisted the reform programme was already settled. The stance was the same in Brussels, where the spokesman for EU economics commissioner Olli Rehn said the rescue deal imposed obligations on Greek leaders. “At the level of the euro group [finance ministers] it’s been said time and again that we think Greece must remain a member of the euro, for instance, but everybody has to carry his responsibilities here,” the spokesman said.

“We can do lots to assist Greece and we are doing so. Our member states, our taxpayers in other European member states of the euro area, are providing this solidarity, but, of course, solidarity is a two-way street.” Even as Greek centre-right leader Antonis Samaras declared he wanted to revise the deal, the EU powers sent the message that there was no hope of that.

“They want to be fully bankrolled by the rest of Europe but that’s not going to happen,” said a senior Berlin official.

Similarly, a high-ranking EU official in Brussels said the choices facing Greece remained as stark as they were before the election. “It’s bailout or bankruptcy.”

Mr Samaras’s New Democracy party and his allies since November in the Pasok socialist movement were the only parties to campaign to implement the EU-IMF deal.

New Democracy was still first past the post but it and Pasok fell two seats short of a parliamentary majority. After hours of talks yesterday, Mr Samaras conceded he was unable to form a coalition. “I did what I could to get a result but it was not possible.” The baton now passes to radical left leader Alexis Tsipras, leader of the second placed Syriza group which campaigned to scrap the bailout.

Mr Hollande will be inaugurated in Paris next Tuesday and plans are already in train for a series of meetings with world and European leaders.

Dr Merkel has invited the president-elect to Berlin and he is to meet US president Barack Obama at Camp David later this month.