Home News Eurozone mulls aid for Greece, Merkel to defend austerity

Eurozone mulls aid for Greece, Merkel to defend austerity

Published on 13/11/2012

Greece's unrelenting debt drama is to top Eurozone finance ministers' talks Monday, due to mull whether Athens has met conditions international creditors demand to release fresh funds to stave off bankruptcy.

No decision is expected from the ministers, who gather from around 1600 GMT, on delivering a much-awaited aid tranche to Greece of 31.5 billion euros ($40 billion), which has been held back since June.

“I expect at best a general agreement recognising what the Greeks did last week,” said an EU diplomat speaking on condition of anonymity.

The talks come after the Greek parliament, despite noisy protests, agreed a tough cost-cutting 2013 budget that further slashes pensions and wages, the latest hurdle cleared by Athens to win foreign aid so it can stay afloat.

Last week lawmakers also adopted a new austerity package that drew 70,000 angry demonstrators into the streets against police.

As a Spanish savings bank this weekend halted home-owner evictions after a second customer’s suicide in two weeks, concerns are mounting over the local and global impact of the tough austerity measures being implemented across Europe.

In Portugal, trade unions and opposition parties plan to take to the streets to protest a visit by German Chancellor Angela Merkel, the leading proponent of spending cuts as the answer to end the euro debt crisis.

“Of course a programme of its kind sparks major debate,” Merkel said of Lisbon austerity moves that sent thousands of soldiers into the streets this weekend.

“It is a long and hard process and I know it requires many sacrifices,” she told Portuguese television.

The new Greek budget provides for a deepening of the worst recession seen by a European nation in modern history.

Debt is likely to rise to 189 percent of GDP next year, almost double the country’s national output, with growth tipped to shrink by 4.5 percent.

“The country is at its limits,” said Evangelos Venizelos, leader of the Socialist Pasok party which is part of the governing coalition.

And Monday, Japan too showed signs of slumping in the face of slowing global demand, with its economy shrinking in the July-September quarter.

Before moving to unblock funds for Athens, part of Greece’s second international bailout, the 17-nation single currency area awaits a report from the so-called “troika” of creditors — the European Union, European Central Bank and the International Monetary Fund.

It will focus on whether Greece is fulfilling the bailout conditions and dwell on how to cope with the country’s ballooning debt.

“There will be no default, not accidental, not premeditated,” an EU official said of Greece on Friday.

Facing a recession which has shrunk the economy by a fifth, Greek Prime Minister Antonis Samaras has warned the country cannot take any more austerity and must have growth.

Given what Greece has done to meet demands from its creditors, there have been discussions on giving Athens a two-year extension to 2016 to meet its targets for reducing its mountain of debt and bring its public deficit under 3.0 percent of GDP.

“If the idea appears broadly accepted by the euro zone member states and the troika, the extra time would mean the Eurogroup would have to provide extra financing for Greece” of around 30 billion euros, said economist Alan Lemangnen of Natixis.

“This is politically difficult in Germany, the Netherlands and Finland,” he said.

Though Samaras had said Athens could run out of money by November 16 failing the release of the 31 billion euros in aid, the country announced Friday that it would sell short-term bills the same day, seeking to cover maturing debt.