Wednesday, February 15, 2012

Eurozone crisis: Greece 'can't take any more cuts'

People clash with police in the streets during a demonstration against the new austerity measures in Athens on February 12  
Thousands protested in Athens on Sunday as Greek MPs approved an austerity package
The Greek people have been pushed to the limit by austerity measures demanded by the EU and IMF, public order minister Christos Papoutsis says.

He said Greeks had made "superhuman" efforts, and "can't take any more".

Meanwhile, Finance Minister Evangelos Venizelos says all remaining issues with the austerity package will be solved in time for a conference call with eurozone chiefs later.

Greece has been told to make deep cuts in return for a huge bailout package.

Athens is negotiating the terms of a 130bn euro ($170bn, £109bn) deal with the EU and IMF.

The Greek parliament approved an austerity package on the weekend, despite violent protests sweeping the country.

But eurozone ministers demanded a further 325m euros of cuts and insisted that all major Greek parties promise to enact the cuts regardless of who wins a general election scheduled for April.

Mr Venizelos said there were "very few remaining issues" with the austerity package.
He said they would be "fully clarified" by 18:00 (16:00 GMT), when the country's leaders are due to discuss the issue with eurozone chiefs.

But he also warned that some eurozone countries were "playing with fire", hinting that some member states no longer wanted Greece in the bloc.

Greek conservative leader Antonis Samaras, whose New Democracy party is a member of the governing coalition and is expected to win April's vote, had hinted that he would try to renegotiate the bailout deal after the election.


There is now huge mistrust between eurozone leaders and Greece. Despite Athens passing its austerity package in parliament last Sunday, Brussels has set two more conditions for Greece's international bailout: that an extra 325m euros of savings are found and that the Greek government sign a pledge to implement the cuts.

The EU has grown exasperated with a perceived lack of commitment by Greece and there is now immense pressure on Athens to quicken the pace of change. But there is real anger in Greece. Athens saw the worst rioting for years when the austerity package was passed by parliament.

Greece is now in a worrying situation. Its economy contracted by 7% in the last quarter.

Eurozone finance ministers will now meet on Monday instead - perhaps the bailout will come then, but this game of brinkmanship could be very dangerous indeed.

Earlier reports said Mr Samaras had refused to give a written assurance that the cuts would be enforced.

But unnamed officials were quoted on Wednesday as saying Mr Samaras had now signed a letter committing him to the austerity package, and it would be delivered by the end of the day.

After a cabinet meeting late on Tuesday, Mr Papoutsis, a member of the other major coalition party Pasok, said Greece had "made all the efforts that it needed to do".

"The people cannot take any more. The government is making superhuman efforts, and we have reached the limits of the social and economic system," he said.

"Greece has owned up to its own responsibilities, and the sacrifices of the Greek people are huge. I believe it is time for everyone to own up to their responsibilities."

Eurozone ministers were due to hold talks on the bailout on Wednesday, but eurogroup head Jean-Claude Juncker announced that the face-to-face talks would be replaced by a conference call.

He said Greece had not shown that it was committed to the austerity plan, and technical work was still needed "in a number of areas".

As well as 17 ministers from nations that use the euro, the president of the European Central Bank Mario Draghi and the Commissioner for Economic and Monetary Affairs, Olli Rehn, had also been due to attend the meeting.

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money.
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The latest bailout was agreed in principle by EU leaders in October, conditional on Greece adopting further measures to cut its deficit and restructure its economy. 

On Sunday, Greek MPs approved extra cutbacks, but coalition parties had to expel more than 40 deputies for failing to back the bill.

Thousands protested in Athens, where there were widespread clashes and buildings were set on fire. Violent protests were reported in cities across the country.

On Tuesday, an official report showed that the decline of the Greek economy accelerated in the final three months of 2011.

The estimate showed that, compared with a year earlier, Greek GDP contracted by 7% in the fourth quarter of 2011.

That is an acceleration from the 5% contraction in the third quarter.

The report also shows that the Greek economy shrank 6% last year, an increase on earlier estimates and the fifth year of recession.
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