ATHENS – Despite a second bailout and a pending deal with investors to write down as much as $134 billion in debt, Greece will not be eligible for continued foreign aid if it does not comply with demands to meet reforms and more spending cuts, officials of the international lenders have warned. The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) have just concluded a deal to provide Greece with a rescue package of $172 billion in loans to go along with a first ongoing series of $152 billion, but has set savings targets the country must meet, including an additional $4.43 billion for this year, which will require reductions in a number of areas, including pensions, pharmaceuticals and defense.
German Chancellor Angela Merkel, whose country is footing much of the bill to save Greece, said, “Of course, we are now watching whether the voluntary debt restructuring, which is new ground to us and which is a very important step for Greece, will be successful and that then the tranches of the second Greek program can be freed up on the condition that Greece meets its commitments.”
In a speech at a meeting of the G20 nations in Mexico City, ECB policymaker Jans Weidmann, said it’s up to Greece to keep implementing further reforms, including privatization of state-owned entities and sale or lease of state properties. “Ultimately, Greece cannot be forced to comply with the program,” Weidmann said. “But it should be clear that no further disbursements will be warranted if Greece fails to keep its side of the bargain,” he added. Without the second bailout, Greece would not have been able to meet an $18.2 billion loan payment on March 20 and may not have had enough money to pay workers and pensioners.
ALL EYES ON GREECE
Jean-Claude Juncker, head of the group of Eurozone finance ministers, said he is hopeful Greece will meet the conditions required for it to receive its second bailout package, but that growth incentives combined with budget consolidation are needed to get stabilize the Greek economy. In a statement ahead of talks with Merkel, Juncker said that Eurozone finance ministers will meet next week ahead of the EU Union summit on March 1-2 to “examine whether Greece has put on track…what it has to bring in preparatory efforts.” He said that he was hopeful that Greece seems to be on the right track finally and that the government and Parliament appear now to be acting “very seriously,” after some EU officials had raised doubts over whether Greece could be trusted to keep implementing reforms once it gets the money.
A hybrid government led by interim Prime Minister Lucas Papademos, a former ECB Vice-President, has pushed through the new austerity measures on top of previous pay cuts, tax hikes, slashed pensions, and 150,000 scheduled layoffs of public workers in the face of ferocious opposition, including protests, riots and strikes. “Nobody should think that Greece will soon bounce back, but nobody should think it would bounce back without our solidarity and without organized growth policy,” said Juncker, who is also Prime Minister of Luxembourg.
In Mexico, Weidmann, a member of the ECB’s governing council and the head of Germany’s Bundesbank, said his country, the biggest contributor to loans for Greece, would continue the aid but expressed skepticism over the prolonged role of the Troika is bailing out Eurozone countries, as Italy and Portugal are struggling as well. He said the Greek crisis has especially difficult issues and that the country’s crisis could not “be resolved solely by throwing money at it,” emphasizing the need for consolidation of public finances and structural reforms. “The success depends on rigorous implementation of the agreed measures and rules,” he said. Greece’s dilemma has threatened to destabilize the Eurozone of countries using the euro as a currency.
(Sources: Reuters, Dow Jones)