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Tags: Greek | Government | Agreement | Bailout

Greek Government Finalizing Agreement on Bailout

Tuesday, 07 February 2012 10:20 AM EST

Greece's government is preparing the text of an agreement on a 130 billion euro ($171.68 billion) bailout that must be put to political leaders for approval, a Greek government official said, suggesting Athens had largely wrapped up talks with lenders on the rescue.

The political leaders are due to discuss that agreement late on Tuesday.

"The Greek government is working on the final document that will be discussed at the political leaders' meeting later in the day," a government official, who declined to be named, told reporters.

Prime Minister Lucas Papademos negotiated through most of the night with Greece's European Union and IMF lenders, ending at 4 am (2 am London time) when the 24-hour strike was about to begin, closing ports and tourist sites and disrupting public transport.

Papademos, a technocrat parachuted in to lead the Greek government late last year, must persuade leaders of the three parties in his coalition government to accept the EU/IMF conditions for the 130-billion-euro ($170-billion) rescue.

With Greece's future in the euro zone in question, German Chancellor Angela Merkel told Athens on Monday to make up its mind fast if it would accept the deal — and its conditions of reforms to make the economy more competitive that are certain to lead to big cuts in living standards.

Early on Tuesday, the strike called by the private and public sector unions GSEE and ADEDY began to bite, bringing the country's main port to a standstill.

"No ships departed from Piraeus port this morning, as a result of the seamen's strike," said a coast guard official.

Tourists Locked Out

In central Athens, tourists were locked out of the Acropolis and public transport was disrupted during the morning rush hour. State hospitals ran on a skeleton staff and teachers, bank employees and telecoms workers were due to join the action.

Greek party leaders face a general election possibly as early as April and have been reluctant to accept yet more austerity to be piled on top of a series of pay cuts, tax rises and job losses imposed since Greece's first bailout in 2010.

After weeks of argument a number major issues have yet to be sorted out at Tuesday's talks.

Greece has yet to identify spending cut measures worth 600 million euros this year, out of a total austerity package of about 3.3 billion euros, a government official said.

The troika was also demanding that private firms' labor costs be cut by about a fifth. This would be done by a combination of reducing the minimum wage by as much as 20 percent — a move that would drag the entire wage scale lower — by cutting holiday bonuses or by scrapping some industry-wide wage bargaining agreements.

Private sector workers currently receive holiday bonuses at Christmas, Easter and in the summer amounting to two months' pay in total, although such benefits have already been cut for public workers.

The troika also wanted top-up, supplementary pensions to be cut by about 15 percent on average to make the pension system financially viable, the official said.

Merkel — whose government funds much of the bailouts for Greece despite public hostility at home — expressed exasperation at the endless arguing in Athens.

"I honestly can't understand how additional days will help. Time is of the essence. A lot is at stake for the entire euro zone," she said in Paris.

Jean-Claude Juncker, who chairs the group of euro zone finance ministers, also backed a plan put forward by Merkel and French President Nicolas Sarkozy to set up a special escrow account into which Greece would make future interest payments as a means of guaranteeing that creditors were consistently paid.

However, Juncker denied that the euro was in danger because of the debt crisis. "The euro will outlive us all," he told German Inforadio on Tuesday.

EU officials say the full package must be agreed with Greece and approved by the troika before Feb. 15 to allow time for complex legal procedures involved in the bond swap to be completed in time for a March 20 bond redemption.

In some euro zone countries, including Germany and Finland, parliamentary approval is required to raise the bailout money.

© 2024 Thomson/Reuters. All rights reserved.

Tuesday, 07 February 2012 10:20 AM
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