Europe on knife edge over floundering Greek debt talks

May 13, 2017

By Siobhan Dowling

A man walks past graffiti displayed on a building on December 6, 2011 in Athens, Greece. Graffiti artists throughout the city are expressing the effects of austerity measures that have plagued the community as Greece continues to struggle in debt while lawmakers today are set to pass next year’s budget.
Milos Bicanski

BERLIN, Germany — The term deadline seems to have lost its meaning, as Greece allows yet another one slip by as it continues to fight to evade default.

The Greek government is juggling talks on three fronts, trying to secure agreement from political parties for further austerity measures, while also trying to get a debt swap deal with private creditors and secure the next bailout.

If Athens fails to access the 130 billion euro bailout ($170 billion) from the troika of the International Monetary Fund, the European Central Bank and the European Union, then it risks a chaotic default.

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Prime Minister Lucas Papademos has sought the agreement of three parties backing his government for a series of measures which include a cut to the minimum wage and spending cuts worth 1.5 percent of GDP. However, despite a reported deadline of noon local time for the deal, there is still no final agreement in sight.

Papademos was due to meet with the party leaders again on Monday as well as with members of the troika.

A meeting of the euro zone’s finance ministers scheduled for Monday was postponed due to the uncertainty over Greece. And it is clear that many of its EU partners are losing patience with Athens.

“We have already missed deadlines,” a euro zone government source told Reuters. “In order to prepare the fresh tranche of money and reschedule debt in the first half of March, a whole series of technical steps must be taken. We need a decision now to put the mechanism of rescheduling in place.”

Greece needs the bailout ahead of a 14.5 billion euro debt repayment due on March 20. It is also in talks with private creditors on slashing 100 billion euros off its massive debt mountain through a debt swap deal. However those talks have also stalled.

The pressure is enormous to get a deal on the table at last. Yet with elections due in April, the political parties are loath to be seen to impose yet more pain on the Greek electorate.

Meanwhile, trade unions are holding a 24-hour strike on Tuesday to protest at policies they see has having only served to contract the economy even further.

The Greek situation was at the top of the agenda in Paris on Monday, when Germany’s Chancellor Angela Merkel met with President Nicolas Sarkozy. The two leaders, who were chairing a regular joint Franco-German cabinet meeting, will later give a joint television interview.

Speaking at a press conference, the pair urged Greek leaders to “live up to their responsibilities” by backing the unpopular austerity package.

Merkel also warned that Greece can receive no more EU aid until it reaches a deal with the troika.

"The Greeks gave us undertakings,” Sarkozy said. “They should respect them scrupulously. There’s no choice, time is pressing. It's a matter of days. Now we need a deal.”