Eurozone finance ministers are set to approve a new $171 billion bailout for Greece when they meet in Brussels on Monday.
French Finance Minister Francois Baroin said that after months of negotiations over terms of the deal for debt-ridden Greece, an agreement is in sight for the country’s second bailout in two years.
“We have all the elements for an agreement. From now on, the elements of a voluntary participation of the banks, of the private creditors and of the public creditors – the states, the central banks – are fully in place.”
U.S. Treasury Secretary Timothy Geithner said Sunday that Greece has adopted a very strong and difficult package of reforms that deserves the international community’s support. He said the United States encourages the International Monetary Fund to support the loan for Greece.
The Greek government fulfilled European Union demands last week and approved a new round of austerity measures that includes a 22 percent cut in the country’s minimum wage and the elimination of 15,000 government jobs. Greece said that without the bailout, it would not be able to pay investors $19 billion in debt when government bonds come due next month. In addition to the international rescue, the government is nearing completion of negotiations with private creditors to cut in half the debt it owes them — a $131 billion reduction.
Even as the Greek government has complied with the international demands for more austerity, the country’s workers have repeatedly taken to the streets in opposition. Thousands of Greeks protested in Athens Sunday against the massive spending and salary cuts. The protests were generally peaceful, but a group of youths broke away from the main march and threw rocks and bottles at riot police, who responded with tear gas.
Millions of Greeks complain that they have already sacrificed enough, saying they do not know how they will cope when their salaries and benefits are slashed. One Greek housewife, Panagiota Petraki, says she does not see better times ahead for her homeland.
“I don’t see light on the horizon. Unfortunately no matter how many loans we receive, if we don’t stand on our own two feet we will never see a recovery in Greece.”
(End optional sound Petraki))
Greece is mired in the fifth year of a severe recession. Retired teacher Michalis Vikendios says the country’s fortunes won’t improve until the economy does.
“Even if they cut all pensions, all benefits for the unemployed, and disabled people, the problem will not be solved. It’s a dead end. No matter how much money we get if commerce doesn’t start working, if they don’t write down debt we will never exit the crisis.”
The apparent agreement on the latest Greek rescue deal came as numerous European leaders had wearied of the long negotiations with the country’s leaders, and missed deadlines on imposing spending cuts the Athens government has earlier agreed to. Some leaders in northern European countries with much stronger economies than Greece openly suggested that it be expelled from the 17-nation bloc that uses the common euro currency.
But analysts warned that if Greece defaulted next month, it could have catastrophic consequences for the eurozone, and possibly lead to a sharp downturn in the world economy. It was an argument that eventually led to agreement for the new bailout.