Greece set to agree to bailout as Germany demands action

By Harry Papachristou and Matt Robinson
Sun Feb 12, 2012

ATHENS (Reuters) – Greek lawmakers looked set to agree to a deeply unpopular bailout deal on Sunday to avert what Prime Minister Lucas Papademos warned would be “economic chaos,” and Germany demanded Athens dramatically change its ways to stay in the euro.

The austerity bill sets out 3.3 billion euros ($4.35 billion) in wage, pension and job cuts as the price of a 130-billion-euro rescue package from the European Union and International Monetary Fund – Greece’s second since 2010.

Greece needs the funds before March 20 to meet debt repayments of 14.5 billion euros and the bill has stirred anger on the streets and turmoil within the coalition government.

Addressing the nation late on Saturday, Papademos warned that failure to back the bill would mean a disorderly default and “set the country on a disastrous adventure.”

“It would create conditions of uncontrolled economic chaos and social explosion,” he said.

“The country would be drawn into a vortex of recession, instability, unemployment and protracted misery and this would sooner or later lead the country out of the euro.”

Greece’s Communist Party accused him of “lying and scaremongering.”

But euro zone paymaster Germany ratcheted up the pressure, saying Europe needed action, not words.

“The promises from Greece aren’t enough for us any more,” German Finance Minister Wolfgang Schaeuble said in an interview published on Sunday in Welt am Sonntag newspaper.

German opinion polls show a majority of Germans are willing to help, Schaeuble said, “but it’s important to say that it cannot be a bottomless pit.

“That’s why the Greeks have to finally close that pit. And then we can put something in there. At least people are now starting to realize it won’t work with a bottomless pit.”

“Greece needs to do its own homework to become competitive – whether that happens in conjunction with a new rescue program or by another route that we actually don’t want to take…”

When asked if that other “route” meant Greece would have to leave the euro zone, Schaeuble said: “That is all in the hands of the Greeks themselves. But even in the event (Greece leaves the euro zone), which almost no one assumes will happen, they will still remain part of Europe.”


He said that the rescue efforts for Greece were proving more difficult than efforts to unify Germany in 1990.

“The reason is the realization that there is a need for change, and change dramatically, still needs to develop further with a lot of people in Greece.”

The 300-seat parliament is due to begin debating the bill at 2 p.m. (1200 GMT) before a vote expected late in the evening.

Demonstrators have pledged to turn out in force at 6 p.m. (1600 GMT) on the main square in front of the assembly, although rainy weather may limit the numbers of protesters.

The austerity measures include 300 million euros in pension cuts and a 22 percent reduction in the minimum wage from about 750 euros a month.

The bill aims to cut Greece’s bloated state sector workforce by about 150,000 people by 2015.

It also provides for a bond swap to ease Greece’s debt burden by cutting the real value of private investors’ bond holdings by some 70 percent.

On a day of dire warnings and stormy debate on Saturday, leaders of the ruling coalition told uneasy lawmakers to support the bill or be dropped from party lists for an election that could come by April.

At least 20 deputies from the two main parties in the Papademos coalition threatened on Saturday to vote ‘No’ – but the bulk of the coalition’s 236 MPs are still all but certain to approve the package. Six members of his cabinet have resigned.

Finance Minister Evangelos Venizelos said the deal had to be approved by Sunday or the country would miss a February 17 deadline to offer the debt “haircut” to its private-sector bondholders.

Euro zone finance ministers also expect Greece to explain by then how 325 million euros from this year’s total budget cuts, as yet unspecified, will be achieved before it agrees to the bailout.

Bailout documents released on Friday left blank the amount of the full rescue package, and Venizelos said Greece might need 15 billion euros more to save the country’s banks, confirming estimates from EU officials.

The EU and IMF say they will not release the aid without clear commitments by the main party leaders that reforms will be implemented, whoever wins the next election.

(Editing by Louise Ireland)

  1. #1 by Winston on Sunday, 12 February 2012 - 9:28 pm

    Now, what will happen if the Greeks just ignore their debts and
    carry on as though nothing is out of the ordinary?
    What sort of scenario is to be expected?

  2. #2 by yhsiew on Monday, 13 February 2012 - 1:15 am

    While it is easy for the Greek government to say “yes” to the austerity plan demanded by Germany, it is certainly not easy for the Greece people to accommodate the hardship arising from the austerity plan. It was reported that mothers in Greece did not have money to buy milk powder for their babies and students had to stop schooling due to shortage of cash.

  3. #3 by Jeffrey on Monday, 13 February 2012 - 6:40 am

    Is Greece’s predicament highlighted here in this blog as a glimpse of what’s to come here – with excessive govt spending on white elephant projects and wastage in support the political patronage system and the bloated civil service created out of the NEP affirmative policies? At the end of the day how long can a subsidy mindset that abjures competitiveness and disdain meritocracy continue in this Globalised environment beset by financial turmoil – when one keeps buying things from abroad more in value than one earns from selling things to the rest of the world? When market’s confidence snaps, money will stop flowing in and in fact like low tide money actually flows out of the country. Indeed it has already begun (notwithstanding Petronas is still, at this moment, pumping out oil and gas).

  4. #4 by dagen wanna "ABU" on Monday, 13 February 2012 - 8:55 am

    Yes vote umno and malaysia will be made to beg for money in no time. Meanwhile umnoputras would continue to behave as if they own bank negara. Every umnoputra yearns to be like jeffery bolkiah – to have thousands of prostitutes on standby in every corner of the world over.

  5. #5 by Bigjoe on Monday, 13 February 2012 - 9:46 am

    THIS outcome averts a possible catastrophe. However, it must be repeated in Italy, Portugal, Spain etc. resulting in essentially a Europe going into recession. In other words, while Europe is not going to crash, as the largest trading partner of Malaysia, it will be a drag that we must make up for that we can’t because UMNO/BN is already TOO LATE with reforms.

  6. #6 by dagen wanna "ABU" on Monday, 13 February 2012 - 1:13 pm

    Is there a recession in europe? Perhaps technically, no. But WTF. Realistically, the feeling on the ground is no different from that of a recession, I suspect.

  7. #7 by dagen wanna "ABU" on Monday, 13 February 2012 - 1:22 pm

    Asking the greeks to give up their lifestyle and adopt austerity measures will be like asking umnoputras and their wives to give up their villas, yacths, ferraris, diamond rings, handbags, horses, mistresses etc etc etc.

    Oooh that’s gonna be difficult.

  8. #8 by SENGLANG on Monday, 13 February 2012 - 3:50 pm

    When TM say the ex chief judge if telling a lie he himself is actually telling a lie. But when he said Europe should bite the bitter bullet and live like a poor man, he is telling the truth.

    Once a great nation and a great world civilization, whose people like to fight the lions and tigers, but today they have become the greatest beggars of this planet. It is no the matter how much cash you have in the bank but how much food in your freeze. Greece story is for all human being to learn. We must use our energy to generate foods rather than waste the energy partying all night long. Greece story is telling us human must live with moral but not greed. We must work to earn our food rather to cheat for our foods. One must not being lazy and expect to have foods on the table after night long partying. We must not waste our resources and we must being prudent in all our spending.

    To the Greece people they must go back to caves if they have to. They have to go back to their history how their ancestors have built up their nation but only crippled by their young generation .

    It is time for the Greece to learn their history instead of blaming other for what they are now today.

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