Athens - Greek leaders failed early on Thursday to agree on
reforms and austerity measures, the price of a bailout to avoid a messy
default, forcing Finance Minister Evangelos Venizelos to go to the country’s
financial backers with an incomplete deal.
Athens' partners in the European Union and the International
Monetary Fund are increasingly exasperated by a lack of agreement on the
measures they demand in return for a €130bn bailout and time is running out for
Greece before a major March 20 bond redemption.
Eurozone officials say the full package must be agreed with
Greece and approved by the EU, IMF and European Central Bank before February 15
so legal paperwork can be completed in time to avoid a chaotic default that
could threaten global economic recovery.
But after all-night talks with leaders of the three parties
in the Greek coalition and with chief EU and IMF inspectors, Venizelos emerged
shortly before dawn to say that one issue was unresolved.
“I am leaving for Brussels in a short while with the hope
that the Eurogroup meeting will be held, and a positive decision on the new
programme will be taken,” he told reporters.
“The financial survival of the country in the coming years
depends on the new programme ... It is time of responsibility for everyone.”
Venizelos had hoped to present to his fellow eurozone
finance ministers in Brussels a fully-fledged deal on a new bailout plan,
including a commitment for €3.3bn in budget cuts this year.
A spokesperson for the socialist PASOK party said disagreement
over pension reform had been the stumbling block.
Prime Minister Lucas Papademos said earlier he hoped the
party leaders could sort out their differences before eurozone finance
ministers meet at 17:00 GMT.
Before then, all eyes will be on what the ECB is willing to
do to help Greece at its monthly policy meeting.
90%
A senior government official said the party chiefs had
agreed on how to make about 90% of the promised savings, leaving a relatively
small hole in the calculations.
Athens had to close this gap quickly, said the official.
“Greece has another 15 days to specify fiscal savings worth €300m,” he said on condition
of anonymity.
International lenders are demanding that the party leaders
commit themselves in writing to implement the programme of pay and pension
cuts, structural and administrative reforms.
However, the leaders have been loath to accept the lenders’
tough conditions, which are certain to be unpopular with voters. They face
parliamentary elections possibly as early as April.
“In these difficult hours we have to look after the ordinary
people, the pensioners,” conservative New Democracy leader Antonis Samaras said
after the political leaders’ meeting.
“I haven’t got the right to not negotiate hard and I don’t
care what other people think about that. We have to make sure that people will
suffer less.”
Newspaper editorials criticised the harshness of the
austerity measures demanded by Greece’s lenders, but said there was no other
option but to give in and agree.
“The memorandum seems, and in fact is, heavy and unbearable
for the majority of the Greek people but unfortunately it is the only choice so
that the country is not led over the cliff,” financial daily Imerisia said.
Greece has been falling deeper into recession since it was
rescued by a first bailout deal in May 2010, with unemployment reaching record
highs of over 18%.
“The measures that are being imposed on Greeks so as to
ensure the restructuring of the debt have the same, unsuccessful recipe: more
cuts, which will cause deeper recession and will create the need for new cuts.
A vicious circle,” centre-left daily Ta Nea wrote in the first-page editorial.
Almost there
Prospects for a deal had brightened, if shortly, when the
finance ministers’ chairperson Jean-Claude Juncker called the Brussels meeting
- which IMF managing director Christine Lagarde will attend - to examine the
bailout and accompanying bond swap.
On offer from the EU and IMF is a package involving the new
rescue funds and a bond swap with private creditors to ease the nation’s large
debt burden.
Athens is also urging the ECB to forego profits on its Greek
bond holdings in what could raise €12bn or more.
The ECB’s 23-member Governing Council has yet to agree a
position.
For the bailout, Athens must accept conditions requiring big
cuts in many Greeks’ living standards. The smallest member of the coalition,
the far-right LAOS party, was particularly uncomfortable with the measures.
Panos Beglitis, spokesman for PASOK which is in the
coalition along with LAOS and the conservative New Democracy party, said they
had disagreed over the level of cuts to supplementary pensions needed to
safeguard the pension system.
However, he told reporters the leaders had agreed to cut the
minimum wage by 22% as part of efforts to make the economy more competitive.
Plans to scrap holiday bonuses paid to private sector workers had been dropped.
Two sources close to the talks said the government would
promise spending cuts and tax rises totalling €13bn from 2012 to 2015, almost
double the €7bn it originally pledged.
Other elements of the deal have been gradually slotting into
place, including the bond swap with private creditors to ease Greece’s debt
burden by reducing the value of government bonds held by banks and insurers.
The new bonds would have an average interest rate of around
3.5%, said state NET TV, with creditors having to swallow a 70% cut in the
value of their debt holdings.
Ratings agency Standard & Poor’s said Greece would
probably fail to achieve manageable debt levels if it relied on the 70%
reduction in the value of bonds held by private creditors, putting the onus on
the ECB to take losses too.