Greek leader seeks to rally support for austerity in bailout plan

Tue, Feb 7, 2012, 00:00

GREEK LEADERS are facing a moment of truth as technocrat premier Lucas Papademos attempts to secure his coalition’s support for a harsh new austerity plan under the country’s second bailout.

A new round of talks in Athens today comes amid mounting international pressure on Greece to accept the terms proposed by the EU-European Central Bank-International Monetary Fund “troika” or face a crippling debt default within weeks.

“There can be no agreement unless the troika’s proposals are adopted. The proposals are on the table. Time is of the essence,” German chancellor Angela Merkel said in Paris after meeting French president Nicolas Sarkozy.

“We want Greece to remain in the euro – this is an opinion we share – but there can be no new programme for Greece if it doesn’t conclude [a deal] with the troika.”

Mr Sarkozy said the Greek question must be settled for once and for all. “We say to our Greek friends that they must now decide. No funds will be released until these decisions are taken,” he said.

“The Greek leaders have given commitments. They must respect them scrupulously. There is no choice.”

Delayed for weeks, the contentious negotiation hit another roadblock yesterday when Mr Papademos postponed until today a meeting with the chiefs of his socialist, centre-right and far-right coalition partners.

With an election due in April, Greek leaders have baulked at the troika’s demand for pay cuts in the private sector, pension reductions and the elimination of thousands of jobs in the public service.

In a further escalation of pressure on the government, the main public and private sector unions in Greece have called a general strike today in protest at the austerity measures.

With Greece now in its fifth year of recession, the situation is increasingly urgent because the government does not have money to repay a €14.5 billion debt next month. The uncertainty has stirred renewed tension in markets, with European and US shares losing ground yesterday.

Greece is close to a deal with private investors to cut €100 billion from its debt but the creditors will not move without agreement on the new EU-IMF loan package.

Several deadlines have been missed already. The latest talks are seen as a last-ditch opportunity to ensure the debt restructuring process starts as planned next week.

“Decisions need to be taken and now the ball is in the court of the Greek authorities,” said the spokesman for EU economics commissioner Olli Rehn. “There’s a whole series of transactions and there’s a whole lot of legal steps which need to be gone through. “We’re trying to compress this into as short amount of time as possible but we felt that we should reach a conclusion some time [around] now.”

Greek EU commissioner Maria Damanaki said contingency plans for her country to leave the euro if it defaults are under examination but she did not say where. A return to the drachma would result in an “absolute downgrade” of living conditions in Greece, she warned.