Even while Greek Finance Minister Evangelos Venizelos was busy in Washington trying to persuade everyone that Greece will not default, although it is drowning in debt and misery over deep pay cuts, tax hikes and slashed pensions while tax evaders have largely escaped sacrifices, European Union leaders were already preparing for what a growing chorus of analysts has said is the imminent certainty of the country’s demise.
Venizelos, who has become the point man on the crisis while Prime Minister George Papandreou has stayed out of the limelight, noted that Greece, subsisting on a $152 billion bailout of rescue loans by international investors, is hoping a second promised round of $157 billion in emergency rescue loans will be implemented. That was agreed upon in July by leaders of the Eurozone, the countries who, like Greece, use the euro as a currency, along with allowing the country to pay banks 21 percent less than owed, a so-called haircut. “Greece has made the definitive decision to do whatever it can to fully implement and in time all the decisions of the July 21 summit,” said Venizelos.
That came as German Finance Minister Wolfgang Schaeuble, whose country is largely footing the bill for Greece’s rescue, suggested that the terms of the international rescue might have to be revised. Venizelos reportedly told leaders of his Socialist PASOK party last week that banks might take a 50 percent hit, although his office denied the report. “One has to see whether what has been envisaged in June, July is still sustainable in the light of more recent developments,” Schaeuble told reporters in Washington before the annual meeting of the International Monetary Fund and the World Bank. At the same time, he said that “to speculate on this at the current juncture would be wrong.” He didn’t say what any new terms might involve.
Venizelos was also to meet with IMF head Christine Lagarde of France, whose agency, along with the European Union and European Central Fund, is providing the loans, including a planned $11 billion installment in October, without which Greece will rapidly run out of money and be unable to pay workers and pensioners. The country has already stopped paying other bills, making investors itchy and unpaid vendors considering whether to stop providing supplies and services.
European Central Bank Governing Council member Klaas Knot told the Het Financieele Dagblad Dutch daily that a Greek default could no longer be ruled out, and that he wondered “whether the Greeks realize how serious the situation is.” Knot said, “It is one of the scenarios. All efforts are aimed at preventing this, but I am now less certain in excluding a bankruptcy than I was a few months ago.”
The situation has become so dire that Deputy Prime Minister Theodoros Pangalos, who has largely ceded authority to Venizelos, who was also named a Deputy Premier when he took over the finance post this summer, said PASOK should consider a coalition with the major opposition Conservative New Democracy party headed by Antonis Samaras, Papandreou’s roommate at Amherst College in Massachusetts in the early 1970’s. Samaras rejected that, saying he prefers tax cuts and would not have proceeded with the PASOK plan to lay off 30,000 workers and fire them in a year, a scheme that could eventually see 100,000 municipal workers gone in four years, creating waves of worry and fear in the workforce and more protests, strikes and the prospect of further riots. According to official statistics more than 800,000 Greeks are now unemployed, a figure that has risen by more than 200,000 in the past year. A third of Greeks aged 15-29 are unemployed while for those at the prime working age of 30-44 the unemployment rate has risen to almost 15 per cent.
(Sources: Kathimerini, Financial Times, Associated Press)