Greek government in desperate battle to avert default
Prime Minister Papandreou canceled his US trip and hinted at further austerity measures after Europe's 'troika' of experts expressed doubt about the Greek government's plans to avoid default.
(Page 2 of 2)
The emergency cabinet meeting on Sunday did not yield any palpable results, but speaking to the press afterward, Mr. Venizelos suggested that further austerity measures might be announced after Monday’s phone conversation with the troika officials. “Our main target will be to reduce spending, to rein in the state,” he told reporters.Skip to next paragraph
Subscribe Today to the Monitor
This means more layoffs in the public sector, Professor Korliras says. “It remains to be seen if Greece’s political system is going to accept this kind of pressure from the troika.”
The political opposition is trying to capitalize on the situation. Conservative leader Antonis Samaras called for snap elections and, referring to yet more austerity measures, said: “This isn’t milking the cow any longer, this means slaughtering it.”
A meeting of EU finance ministers last Friday and Saturday in Poland postponed a decision on the next loan tranche for Greece until October. According to Greek media, Venizelos experienced a “very negative climate” at the talks. His German counterpart, Wolfgang Schäuble, warned Greece in a newspaper interview on Sunday to take the threat of a payment stop seriously. No one should be under any illusion that the next credit tranche would be paid if Greece didn’t meet the troika’s requirements, he said.
For the first time, Mr. Schäuble also hinted at the possibility of Greece leaving the eurozone. “Being a member of a monetary union is not just a chance, but also a heavy burden,” he said. “The Greeks have to decide if they are willing to bear this burden.”
“These comments from the German finance minister might suggest that the endgame is nigh,” says Gary Jenkins, head of fixed income at investment bank Evolution Securities in London. “It’s not going to happen tomorrow, as the risk of contagion is still high, but the political will amongst EU governments to keep Greece in the eurozone is clearly eroding.”