Greece’s crucial 130 billion euro (US$173 billion) bailout appeared to be in limbo yesterday, after coalition party leaders failed to accept the entire batch of new harsh austerity measures demanded by creditors.
After marathon meetings with party leaders and international debt inspectors that ended at about 5am, Greek Minister of Finance Evangelos Venizelos headed to Brussels to meet top EU officials, hoping to rescue the agreement and stave off bankruptcy.
The Athens talks stalled after leaders of the three parties backing Greece’s coalition government approved sweeping new austerity measures but balked at demands to make 300 million euros in pension cuts and another 325 million euros in savings.
The sums are relatively small compared with the bailout package, but if Athens does not make up for it, it faces a potentially devastating default next month.
Venizelos issued a dramatic plea to the coalition leaders to swiftly resolve their differences, warning that Greece’s “survival over the coming years” depends on the bailout and a related debt-relief agreement with private creditors.
“It will determine whether the country remains in the eurozone or whether its place in Europe will be endangered,” Venizelos said.
Markets nevertheless seemed hopeful that a deal will eventually be reached, with analysts suggesting the political leaders wanted to show their resistance to the foreign demands ahead of general elections later this year.
Greece’s main stock exchange was up 1.3 percent, while the STOXX 50 index of leading European shares was up 0.1 percent and the euro rose 0.4 percent against the US dollar.
Jacob Funk Kirkegaard, research fellow at the Peterson Institute for International Economics, said the lack of a full agreement during Wednesday’s talks highlights the “certain amount of political theater involved here.”