Global Policy Forum

Disbelief as Greek Politicians Delay Deal on €130bn Rescue Package

An expected agreement among members of the Greek national government on the acceptance of a deal with "the troika" (EC, ECB and IMF) to implement further austerity measures in exchange for another bailout package, has been delayed. As Chancellor Merkel reminds that "time is of the essence" and other stakeholders heighten the tension by expressing their disbelief, government sources report that "details have to be fine-tuned." This Guardian article reports that it is not the details, but the upcoming elections that have led party leaders to political brinkmanship. In efforts to stay in power, the elites are trying to make their voters believe they do not want any part of the deal, but still try to get as much out of it as possible.

By Helena Smith and Phillip Inman

February 6, 2012

Greece appeared intent on taking make-or-break talks over a €130bn (£108bn) rescue programme for the debt-choked country down to the wire tonight as officials announced that the discussions would be delayed.

Confounding market expectation and European hopes, the government said agreement over the conditions attached to further aid could not be reached as a meeting between political chiefs and the prime minister, Lucas Papademos, had been deferred until today.

"All parties have basically accepted the deal," said a well-briefed source, referring to the three elements in Papademos's national unity coalition. "But it is felt that the details have to be fine-tuned. The leaders want to know what they are signing up to."

With Greece staring at the spectre of bankruptcy – barely six weeks before it has to make bond repayments worth €14.5bn – EU officials expressed disbelief that politicians could not finally put their name to an accord.

Unable to conceal her own exasperation, the German chancellor, Angela Merkel, said: "I honestly can't understand how additional days will help.

"Time is of the essence. A lot is at stake for the entire eurozone," she said after holding debt crisis talks in Paris with the French president, Nicolas Sarkozy.

Papademos, a technocrat who was appointed to the post with the express purpose of passing the measures to secure the bailout deal, originally told the leaders to conclude talks by midday.

But the deadline came and went. Infuriated, Amadeu Altafaj-Tardio, a spokesman for the European economic affairs commissioner Olli Rehn, said: "The truth is we are already beyond deadline … the ball is in the court of the Greek authorities."

Hours later, the prime minister's office announced that the meeting would take place in the "late afternoon". Rumours swirled that a deal was near, with headway made on the highly contentious issues of wage cuts in the private sector. In anticipation, the Athens stock market rallied.

By mid-afternoon, however, the meeting had been cancelled with officials saying Papademos would instead hold talks with visiting inspectors from the European Union, European Central Bank and International Monetary Fund, the "troika" propping up the insolvent Greek economy.

The postponement confirmed that ahead of general elections in April the high-stake talks have also been turned into a high-stakes game of brinkmanship.

Acutely aware of the uproar that further austerity is bound to ignite among a populace that has endured unprecedented belt-tightening but seen little in return as Athens repeatedly misses fiscal targets, Greece's political class has worked furiously to disassociate itself from reforms increasingly seen as counter-productive.

Emerging from a marathon session of similar talks on Sunday, Giorgos Karatzaferis, the media-savvy leader of the populist Laos party, said: "I'm not going to contribute to the explosion of a revolution [by backing] a wretchedness that will then spread across Europe."

Racheting up the pressure on politicians, powerful unionists in both the public and private sector warned that the reaction to any agreement entailing further austerity would be "ferocious and possibly uncontrollable". A general strike was called for Tuesday with civil servants and workers saying they would step up action later in the week.

Ilias Iliopoulos, at the civil servants' union ADEDY, said: "We don't care if they feel forced to accept such measures. The fact is 500,000 families are not even earning a euro a week and another million only have work sporadically."

"Greek people can't take the burden of any more measures. If our politicians are foolish enough to agree to what our so-called saviours say, if they go ahead with yet more cuts and job losses, there will be an explosion. The reaction will be uncontrollable."

The deadlock immediately raised fears that three years into the crisis, Greece might finally be heading for the disorderly default international creditors, lead by Germany in the EU, have tried to avert.

But in Athens analysts insisted that the real threat to keeping bankruptcy at bay lay not so much in the negotiating arena as in a society seething with anger over the prospect of more austerity.

"The Greek side has no cards in its hand," said Theodore Pelagidis, professor of economics at Piraeus University. "This is not about not accepting the bailout but about politicians wanting to convince Greeks that they have not just submitted to the demands of foreign lenders but done their utmost to get the best deal. Yes, there are a lot of painful details that have to be discussed but all these delays are actually part of a show."

Eurozone finance ministers have told Greece that they want a blueprint of a basic deal to be approved by Wednesday's meeting in Brussels.

No longer willing to take any chances, Papademos on Monday ordered the finance ministry to outline what consequences bankruptcy might have on society and the economy. One Greek official said it would make Argentina "look like a picnic".

Papademos's plan is to present the findings to Greece's squabbling political leaders on Tuesday to ensure they sign off on the deal immediately.

As Greece failed to resolve its crisis, the Portuguese prime minister attempted to stave off speculation that his country would be the next to find itself in talks over a rescue package. Pedro Passos Coelho said Portugal's debts were under control and could be contained without the need of a fresh injection from the EU.

"We will not allow what happened in Greece to happen here," he said. "We hope that there will be the will to reach a new aid programme for Greece."

Coelho likened Portugal to Ireland, which he said had a debt structure that would delay the need for loan repayments until next year. "Our debt profile is very similar to Ireland's, both in absolute value and in debt to GDP terms," he said.


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