Greek party leaders seek deal as bankruptcy looms

 

Greek party leaders will meet today to seek a long-delayed
agreement on harsh cutbacks demanded to avoid looming bankruptcy, amid
intense pressure from its bailout creditors to reach a deal, a general
strike disrupting public services and thousands of protesters taking to
the streets of Athens.


Heads of the three parties backing the interim government will confer with Prime Minister Lucas Papademos on new salary cuts and job losses, which Greece's eurozone partners and the International Monetary Fund are demanding to keep the country's vital rescue loans flowing.

A general strike against the impending cutbacks stopped train and ferry services nationwide, while many schools and banks were closed and state hospitals worked on skeleton staff.

Riot police fired tear gas to repel hundreds of anti-austerity protesters trying to break a cordon outside Parliament, but no arrests or injuries were reported and the clashes quickly subsided.

Police said some 10,000 people took part in an otherwise peaceful march to Parliament under heavy rain, organized by the country's two biggest labor unions. A separate demonstration by about 10,000 Communist unionists ended without incident.

On Monday, Prime Minister Lucas Papademos' government caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, out of a total 750,000. The decision breaks a major taboo, as state jobs had been protected for more than a century to prevent political purges by governments seeking to appoint their supporters.

Athens must placate its creditors to clinch a €130 billion bailout deal from the eurozone and the IMF and avoid a March default on its bond repayments.

Among the measures the EU and IMF are pressing Greece for is a cut in the €750 minimum wage to help boost the country's competitiveness. This reduction would have a knock-on effect in the private sector — because private companies also base their salaries on the minimum wage — and even unemployment benefits. Unions and employers' federations alike have deplored the measure as unfair and unnecessary.

"It is clear that there is a lot of pressure being put on the country. A lot of pressure is being placed on the Greek people," Finance Minister Evangelos Venizelos said during a break in talks with EU-IMF debt inspectors late Monday.

He called on coalition parties to work more closely together.

"To save Greece ... will involve a huge social cost and sacrifices," Venizelos said. "On the other hand, if the negotiations fail, bankruptcy will lead to even greater sacrifices."

"No one is as strong as Hercules on his own to face the Lernaean Hydra," a swamp monster in Greek mythology, he said. "We must all, together, fight this battle, without petty party motives and slick moves.

Greece has been kept solvent since May 2010 by payments from a €110 billion international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.

As well as the austerity measures, the bailout also depends on separate talks with banks and other private bondholders to forgive €100 billion in Greek debt. The private investors have been locked in negotiations over swapping their current debt for a cash payment and new bonds worth 50 percent less than the original face value, with longer repayment terms and a lower interest rate.

Greek government officials say they expect private investors to take losses of an estimated 70 percent on the value of their bonds.

The EU-IMF bailout will also provide an estimated €40 billion to protect Greek banks from immediate collapse. Domestic lenders and pension funds hold some 34 percent of the country's privately-owned debt.

However, the bailout has to be secured for the deal with private investors to go ahead as about €30 billion from the bailout will be used as the cash payment in the bond swap deal.

A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal.

But on Tuesday, the EU commissioner Neelie Kroes, in charge of the bloc's digital policies, said Greece's exit wouldn't be a disaster.

Kroes told Dutch newspaper De Volkskrant that "It's always said: if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true."

Greece's coalition party leaders held a first key meeting on the austerity measures on Sunday, and postponed a second round of talks by a day so Papademos could complete negotiations with EU-IMF debt inspectors that ended early Tuesday.

The leaders have already agreed to cut 2012 spending by 1.5 percent of gross domestic product — about €3.3 billion — improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them. But the details remain to be worked out.

Creditors are also demanding spending cuts in defense, health and social security.

European Commission spokesman Amadeu Altafaj Tardio said Monday that Greece was already "beyond the deadline" to end the talks.

Also Monday German Chancellor Angela Merkel warned that "time is pressing," and "something has to happen quickly."

While Greece remains cut off from international bond markets — where it would have to pay interest of about 35 per cent to sell 10-year issues — it maintains a market presence through regular short-term debt sales.

On Tuesday, the public debt management agency said Greek borrowing costs dropped slightly as the country raised €812 million in an auction of 26-week treasury bills. The coupon was 4.86 percent, compared to 4.90 per cent in a similar auction last month, while the auction was 2.72 times oversubscribed.

AP

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Trainee / Graduate Helpdesk Analyst

£20000 per annum: Ashdown Group: A highly reputable business is looking to rec...

Recruitment Genius: Estimator

£28000 per annum: Recruitment Genius: This company is a major supplier of buil...

Recruitment Genius: Software Developer

£28000 - £40000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Application Support Engineer with SQL skills

£28000 per annum: Ashdown Group: A highly reputable business is looking to rec...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas