Emergency talks on Greek bail-out loan

Greek parliament to vote on austerity measures; wages will not be paid if aid is not delivered.

An emergency meeting of eurozone finance ministers has been scheduled for 3 July to discuss whether to release a €12 billion loan to Greece, which is first being required to approve further austerity measures.

This week, the EU’s leadership warned that there is no ‘plan B’ for the stricken country. The EU and the International Monetary Fund (IMF), which are both contributing to the loan, have made it clear that the funding will not be forthcoming unless Greece’s parliament passes a €28bn package of spending cuts and tax increases on Wednesday (29 June). Greece needs to receive the money by 15 July if it is to avoid defaulting on its debt repayments.

A spokesman for Greece’s government said in a television interview on Tuesday (21 June) that the country would not be able to pay wages and pensions after 15 July if the money, which is the fifth tranche of a €110bn rescue package agreed in May 2010, was not released.

Both in public and privately, EU officials say that there is no contingency plan in place if Greece’s parliamentarians do not approve the austerity legislation and the government does not start its much-delayed €50bn privatisation programme.

José Manuel Barroso, the president of the European Commission, said this week: “If anyone thinks ‘without the programme agreed with the EU and the IMF we can still get by somehow, there’s an alternative programme’, that’s not true. There is no alternative programme. The alternative would be worse than the current situation.”

Vote of confidence

Hopes were raised on Tuesday that the legislation implementing the austerity package would be passed when George Papandreou, Greece’s prime minister, survived a vote of confidence in his reshuffled cabinet by 155 votes to 143.

However, Antonis Samaras, the leader of Greece’s centre-right opposition New Democracy party, said yesterday (22 June) that his party would vote against the proposals.

While his hard-line stance does not deliver a fatal blow to the chances of the legislation being approved, it does ruin hopes for a cross-party consensus, which EU leaders had said was of paramount importance.

“Given the length, magnitude and nature of required reforms in Greece, national unity is a prerequisite for success,” said a statement from eurozone finance ministers issued in the early hours of Monday morning (20 June) after a meeting in Luxembourg.

Barroso said, however, that opposition support for the package was not a formal condition for approval by finance ministers. “We never said the opposition had to approve the programme,” he said. “We said it was important to have as broad political support as possible. The responsibility for democracy is also with the opposition.”

Cohesion funds

Leaders of EU member states will discuss the latest developments when they meet in Brussels today and tomorrow (23-24 June). They will discuss an idea raised by Barroso to give Greece early access to €1bn from the EU’s cohesion funds to help the economy grow and tackle unemployment.

Leaders will also discuss a potential new bail-out for Greece. It is estimated that the country will need at least another €85bn when the current funding runs out next March. Finance ministers are expected to continue talks on this issue on 3 July, building on initial agreements made at their last meeting to consider using private-sector involvement in the form of voluntary roll-overs of existing Greek debt.

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