Austerity plan doubted

Not long after Greece made the politically unpopular decision to slash government spending to ease its debt crisis, Germany’s finance minister questioned whether the deal goes far enough to earn approval of a crucial C130 billion bailout.

ATHENS — Not long after Greece made the politically unpopular decision to slash government spending to ease its debt crisis, Germany’s finance minister questioned whether the deal goes far enough to earn approval of a crucial C130 billion bailout.

Greece’s new austerity plan would make deep cuts to jobs and wages and it ignited fresh criticism from unions and the country’s labour minister, who resigned in protest. Finance ministers from the 17 countries that use the euro are meeting in Brussels to scrutinize the plan.

Greek prime minister Lucas Papademos earlier Thursday said that all major party leaders in the country’s coalition government had given their backing to a new round of painful spending cuts he had worked out with the European Union, the European Central Bank and the International Monetary Fund and that the talks “were successfully concluded.”

However Germany’s Finance Minister Wolfgang Schaeuble on Thursday warned that the new round of spending cuts appears to not yet fulfil all the conditions for a C130 billion bailout.

Germany is a leading force in the group of 17 countries that use the euro as their currency — the so-called “eurozone” — using its considerable economic clout to influence decision-making and policy.

“The agreement, as far as I understand, is not at a stage where it can be signed off,” Schaeuble said as he arrived in Brussels to meet with his eurozone counterparts, the heads of the European Central Bank and the International Monetary Fund. “It’s a stance in the negotiations that was agreed on but no one expects that this negotiation stance can get support.”

The crucial agreement in Athens came shortly after Greek Finance Minister Evangelos Venizelos arrived in Brussels for talks on the new bailout with his colleagues from the 17 euro countries. Although all other cuts demanded by the troika of bailout creditors were approved — including a 22 per cent cut in the minimum wage, firings of 15,000 civil servants and an end to dozens of job guarantee provisions — party leaders had balked at new pension cuts worth an estimated C300 million ($400 million), leaving the bailout in limbo and the threat of bankruptcy high.

A spokeswoman for Papademos’ office said earlier Thursday that the deal would allow alternatives to the rejected pension cuts. She did not elaborate on what the alternative proposals were. The spokeswoman spoke on customary condition of anonymity.

Greece needs the bailout by March 20 to redeem C14.5 billion worth of bonds coming due.

A forced bankruptcy would likely lead to the country’s exit from the euro common currency, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal, Ireland and Italy.

But financial analysts fear a chain reaction similar to the financial meltdown triggered by the collapse of investment bank Lehman Brothers in the fall of 2008.

When eurozone leaders tentatively agreed on a second bailout for Greece in October, they set several key parameters that would have to be met for country to get more aid.

Those included bringing Greece’s debt level down to 120 per cent of economic output by 2020, limiting official rescue loans to C130 billion and getting firm approval from all Greek political forces that new spending cuts and reforms would actually be implemented.

“Those general requirements are not fulfilled yet,” Schaeuble said, adding that no decision on the new bailout was expected at Thursday’s meeting.

In addition to the new austerity measures, another method to reach the October targets is a deal with banks and other private bondholders to forgive Greece some C100 billion in debt.

However, last week an EU official said that even taking into account the debt forgiveness and planned austerity measures, a gap of some C15 billion remained to reach the targets.

The EU hopes that the ECB, which holds a significant amount of Greek bonds, will contribute to closing that gap, but the central bank has so far dodged questions on whether it will participate.

Jean-Claude Juncker, the Luxembourg prime minister who will chair Thursday’s meeting, also said that no decision was expected. “There are still a lot of uncertainties,” he said, referring to the Athens deal.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Two roundabouts will be built at each end of the Highway 2 and McKenzie Road overpass in Red Deer County at the south end of Gasoline Alley. Major detours will be in place this summer while construction is underway. Photo by PAUL COWLEY/Advocate staff
Powerline work causes delays on Highway 2 in Red Deer

Southbound drivers on the QEII are experiencing delays Wednesday morning. Powerline work… Continue reading

Ponoka RCMP said Traytyn Okeymow, 22, was last seen at this residence at about 9:45 p.m. on April 4. (Photo contributed)
Missing man located by Ponoka RCMP

Ponoka RCMP seek public’s help

RCMP file photo (Photo by Jeff Stokoe/Advocate staff)
RCMP lay cattle rustling, drug and firearm charges in central Alberta

A cattle rustling investigation in Clearwater County led to firearms and drug… Continue reading

(File photo by Advocate staff)
European Commission President Ursula von der Leyen delivers a statement after a meeting of the college of commissioners at EU headquarters in Brussels, Wednesday, April 14, 2021. EU Commission chief Ursula von der Leyen announced plans Wednesday for a major contract extension for COVID-19 vaccines with Pfizer stretching to 2023. (John Thys, Pool via AP)
EU reaches major climate deal ahead of Biden climate summit

Provisional deal reached after officials negotiated through the night

A vial of the Medicago vaccine sits on a surface. CARe Clinic, located in Red Deer, has been selected to participate in the third phase of vaccine study. (Photo courtesy www.medicago.com)
Red Deer clinical research centre participating in plant-based COVID-19 vaccine trial

A Red Deer research centre has been selected to participate in the… Continue reading

Opinion piece
Opinion: Federal budget spends more on everything with no plan to pay for it

The British politician Nigel Lawson once said: “To govern is to choose… Continue reading

FILE - Ted Nugent performs at Rams Head Live in Baltimore on Aug. 16, 2013. Nugent revealed he was in agony after testing positive for coronavirus — months after he said the virus was “not a real pandemic.” “I thought I was dying,” Nugent says in a Facebook live video posted Monday. (Photo by Owen Sweeney/Invision/AP, File)
Ted Nugent, who once dismissed COVID-19, sickened by virus

Rocker a supporter of ex-President Donald Trump

Gwynne Dyer
Bolsonaro: Suicide by COVID

‘Rounding into the home stretch, it’s Italy by a full length, then… Continue reading

Queen Elizabeth II during her visit to Red Deer, June 28, 1990. (File photo by Advocate staff)
Red Deer and the Royal Family

The recent passing and funeral of Prince Philip, Duke of Edinburgh, in… Continue reading

Vancouver Canucks' Tanner Pearson, right, celebrates after scoring against Toronto Maple Leafs goalie David Rittich during the third period of an NHL hockey game in Vancouver, on Tuesday, April 20, 2021. THE CANADIAN PRESS/Darryl Dyck
Pearson, Sutter each score twice as Canucks dump Leafs 6-3

Pearson, Sutter each score twice as Canucks dump Leafs 6-3

Most Read