Greek Bailout in Jeopardy

Hugh Duncan – Daily Mail February 15, 2012

Greece closer to the brink as economy slumps by 7% and crunch bailout meeting is cancelled

An elderly woman begs outside the Bank of Greece headquarters in Athens. Click to enlarge

The outlook for Greece darkened yesterday as it plunged deeper into recession and eurozone leaders cancelled a meeting to discuss a crucial bailout.

New figures showed that economic output slumped by 7 per cent year-on-year in the fourth quarter of 2011 – amid increasing fears that Greece will not deliver the £2.8billion cuts package it has pledged in return for another huge bailout.

Experts had expected a fall of only 5 per cent ahead of the latest round of deeply unpopular austerity measures

Greece is now in its fifth year of recession and faces even deeper spending cuts in exchange for bailout funds from Europe and the Inter-national Monetary Fund.

‘We were expecting the recession to get worse but not at this pace,’ said Nikos Magginas, senior economist at National Bank of Greece.

Fears that Greece is heading for a chaotic default on its towering debts were fuelled after an emergency meeting of eurozone finance ministers planned for tonight was cancelled.

Jean-Claude Juncker, the Luxembourg Prime Minister who chairs the so-called eurogroup, said he was still waiting to receive assurances from Greek leaders over the £2.8billion package of cuts to wages, jobs and pensions.

 
 
 

Petrol bomb explodes during protests in Syntagma Square on Sunday. Click to enlarge

Athens went up in flames on Sunday night as Greek MPs voted for the savage austerity bill to satisfy their international paymasters and secure a new £110billion bailout.

Mr Juncker said ‘further technical work’ was required between Greece and the troika of lenders – the European Union, the European Central Bank and the IMF – including details of another £270million of cuts
‘Furthermore, I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme,’ he said.

Greek conservative party leader Antonis Samaras – a frontrunner to win elections in April – refused to sign a written pledge to implement painful spending cuts if he becomes prime minister.

Mr Samaras has suggested that he would rather renegotiate the terms of the austerity package thrashed out on Sunday night – much to the irritation of European leaders.

‘So far Samaras has not given a letter of commitment and this is a problem,’ said a source close to the talks.

European aides also said that last night’s meeting of the ‘euro working group’ – senior officials from eurozone finance ministries – was disrupted by a widening split over whether Athens can be trusted with a second bailout

It was hoped that the latest bailout package – which also includes banks and other private lenders writing off at least half of the debt – would save Greece from collapse. But European leaders are growing increasingly frustrated with Greece after a string of broken promises raised fears that the country will not deliver its end of the bargain.

‘We are getting closer to default,’ said a senior eurozone official. ‘Germany, Finland and the Netherlands are losing patience.’

If Greece does not seal a deal for more bailout funds, it will run out of money next month when it needs to repay £12billion of debt.

That would trigger a chaotic default on the debts and could see Greece expelled from the single currency.

Eurozone leaders will now hold a conference call tonight to discuss the Greek crisis before meeting on Monday.

Following the rioting in Greece on Sunday, the Athens Chamber of Commerce said yesterday that at least 150 businesses were damaged in the mayhem.

‘Most will probably never open again,’ said spokesman Panaghiotis Kanellas. ‘Beyond the damage, worth tens of millions of euros, at least 500 jobs are now in question.’

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