Greece’s lenders sent a team to Athens yesterday to inspect a government austerity plan they want implemented in exchange for aid, while Germany suggested a new bailout may be renegotiated as debate raged over the size of losses bondholders should face.
Facing a wave of strikes and protests, Greece’s Socialist government is accelerating its debt strategy to meet the terms of an IMF and EU rescue deal so it can receive a new loan next month and avoid bankruptcy.
The “troika” team of inspectors, which had threatened to cut off aid if Athens did not move faster, is expected to begin talks today on a plan demanded by lenders to deepen budget cuts and raise taxes, which has set off protests not seen since June when riot police fought running battles with activists.
Photo: AFP
German Chancellor Angela Merkel suggested that parts of a planned new 109 billion euro (US$148.6 billion) rescue for Greece could be reopened, depending on the outcome of the troika’s audit.
“We have to wait and see what the troika ... finds and what it will tell us [whether] we will have to renegotiate or not,” Merkel told Greek state television NET, without elaborating.
Several hundred activists affiliated with the Communist Party of Greece converged on the Ministry of Finance yesterday waving a banner saying “We won’t pay!” They planned to burn bills for a new one-off income tax introduced this summer while Athens and other parts of the country were hit by transport strikes.
If deemed adequate by the inspectors, the new austerity drive will secure an 8 billion euro loan Greece needs to pay bills and salaries next month and bring it closer to starting a second bailout agreed in July.
As a condition of the visit and to resolve the row with the lenders, the Greek government had promised to send a written assurance outlining its new plan to meet its bailout targets. Its contents have not been made public.
Germany has repeatedly said negotiations about the details of the second rescue deal can begin only when the troika says Greece has qualified to receive the tranche expected next month, the sixth under a first bailout agreed to last year.
At the same time, leaders from around the world have urged eurozone capitals to end a tortuous debate and create a safety net big enough to prevent Greece’s problems from spreading to other euro zonemembers and triggering a fresh global downturn.
The second bailout aims to ease Greece’s debt burden by imposing a 21 percent loss on private Greek bondholders.
After intensifying debate among economists and policymakers that only a 50 percent loss would make the country’s debt viable, more investors have signed up to the bond exchange plan, Greek financial daily Naftemporiki reported.
Citing an unidentified finance ministry official, it said Greece’s weeks-long struggle to lure private bondholders into the rescue plan had ended with it reaching the 90 percent participation target.
The finance ministry declined to comment on the report.
There is no agreement yet among eurozone governments on whether a renegotiation is needed, including more pain for Greece’s bank creditors, or on a US-sponsored plan to leverage the bloc’s rescue fund to give it more firepower.
Germany’s Bundestag will vote today on widening the scope of the European Financial Stability Facility bailout fund, as agreed by the EU leaders on July 21.
Bus and tram operators and taxi drivers staged strikes yesterday, causing long traffic jams leading into the ancient city center and forcing luggage-hauling tourists scrambling to find rides to the airport.
Other trades ranging from craftsmen, printers and tax officials also staged stoppages and activists planned marches on parliament and the port of Piraeus later in the day.
Lawmakers opened the way to the troika visit on Tuesday by passing a property tax bill. That piles the pressure on Greeks suffering from several waves of belt-tightening and deepens an economic downturn heading into its fourth year.
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