Greece Says Loans Will Prevent Default
Published: September 28, 2011 (Issue # 1676)
PETROS GIANNAKOURIS / AP
Protesters hold a giant flag outside the Greek parliament during a protest against austerity measures Tuesday.
BERLIN — Greece will receive its next batch of bailout loans in time to avoid a disastrous default, the finance minister said Tuesday, as stock markets rallied on hopes that the prime minister would discuss new ways of solving the crisis with Germany’s leader later in the day.
Reports that European leaders are considering bolder moves to relieve Greece and other countries of their debt burden have buoyed spirits in financial markets, though officials in Chancellor Angela Merkel’s government have downplayed such speculation.
The current plan is to have Greece implement painful debt-reduction measures in exchange for rescue loans.
Greece’s international creditors are holding up payment of the next batch of those loans until a review of the reforms is completed in the coming days. Without the money, Greece faces bankruptcy in mid-October, potentially sending shock waves through the financial sector in Europe and abroad.
“I am very confident in … the disbursement of the sixth tranche,” Finance Minister Evangelos Venizelos said, speaking above the sound of chanting from protesting tax office workers outside the ministry, who blew whistles and set off a fake siren. “But we must do what has been agreed.”
The minister said the country had already made great efforts to achieve its fiscal targets, but that a “hyper-effort” was necessary to fully meet its commitments.
Some experts, however, say the current course of austerity is untenable and that Greece will need bigger debt relief. Analysts say that could be achieved by imposing tougher losses on private bondholders, boosting capital in European banks that would take such losses, and boosting the size of the rescue fund.
Under the current plan, Greece had originally expected debt inspectors from the International Monetary Fund, the European Central Bank and the European Commission to complete a review in September and approve the sixth installment of loans from its 110 billion ($149 billion) international bailout fund.
But the inspectors, known collectively as the troika, suspended their review earlier this month amid talk of missed targets and budget shortfalls.
Venizelos said the troika would return to Athens this week, and that the disbursement of the next bailout tranche, worth 8 billion, would be done in time as there were several meetings in October during which other eurozone countries could approve the payment.
In Berlin, Greek premier George Papandreou told a conference of the Federation of German Industries that “we are borrowing to repay” — but also stressed that Europe needs to show it can get its act together.
“I can guarantee that Greece will live up to all its commitments,” Papandreou said ahead of an evening meeting with Chancellor Angela Merkel. He promised that Greeks will “fight our way back to growth and prosperity.”
The government recently announced new austerity measures, including pension cuts and tax hikes. Lawmakers were to vote Tuesday night on a new property tax, which is to be paid through electricity bills to make it easier for the state to collect.
Greeks have been outraged by the introduction of yet more spending cuts and tax hikes after a year of austerity. Unions have responded with repeated strikes and protests. Public transport workers walked off the job Tuesday for two days, and were to be joined by taxi drivers on Wednesday. Tax office workers were also on strike.
Given the sacrifices being made by ordinary Greeks, Papandreou said that the “persistent criticisms leveled against Greece are deeply frustrating.”
“You as businesspeople, you know that inspiration, innovation and motivation are important parts of success,” he told representatives of Germany’s leading industries. “If people feel only punishment and scorn, this crisis will not become an opportunity — it will become a lost cause.”
He added that Europe needs to prove it can get its act together. Germany, Europe’s biggest economy, has been a sometimes-reluctant leader of the rescue efforts.
“We must prove to the markets that we have a firm grip on the debt crisis and that we are determined to resolve it together,” he said.
Merkel, also speaking at the industry forum, pledged support for Greece but didn’t promise any specific new measures. She expressed “absolute respect” for structural reforms pushed through by Papandreou’s government.
“The all-important thing is — and we will provide every assistance that is wanted from the German side — that Greece wins back confidence; that we get out of this terrible development that there is bad news every month; and that the impression arises on the markets that Greece is on the right track,” she said.