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Eurozone ministers cancel meeting on Greece bailout

Jean-Claude Juncker said he was awaiting undertakings from Greek political leaders on implementing austerity package

Eurozone finance ministers cancelled Wednesday’s special meeting in Brussels on Greece’s €130bn bailout as Athens scrambled to provide proof that it was capable of making a further €325m (£270m) in budget cuts.

Ministers in the Eurogroup had been expected to gather for talks which, if all had gone to plan, would have approved the rescue funds to save Greece from a messy bankruptcy next month. Data released by the Greek statistics agency showed the country’s economy had shrunk by 7.0% in the last quarter of 2011.

With the EU’s patience with Greece close to breaking point, the eurogroup chairman, Jean-Claude Juncker, said the ministers would hold only a telephone conference call before a regular meeting already scheduled for 20 February.

Juncker said he was still awaiting written undertakings from Greek party leaders on pushing through the austerity package of pay, pension and job cuts which parliament passed on Sunday as rioters torched dozens of buildings in central Athens.

“I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme,” he said.

Under intense pressure to come up with the additional savings ahead of the meeting of finance ministers at which Athens hopes the deal will be sealed, Greece’s prime minister, Lucas Papademos, had called an urgent cabinet meeting to see how the €325m shortfall could be plugged.

As speculation mounted that Wednesday’s meeting would be cancelled, a Greek officials said: “The clock is ticking and we have to meet this demand,” said one. “We have a deadline [to meet €14.5bn in loan repayments] on March 20.”

In a dramatic parliamentary vote on Sunday Greece agreed to implement €3.3bn in cuts in return for further financial support from the EU, the European Central Bank and the International Monetary Fund. But eurozone finance ministers, who had been expected to endorse the deal last week, said Athens would still have to make more cuts after leaders backing Papademos’s coalition government refused to cut pensions further.

And in a sign of the growing distrust between Greece and its foreign lenders, political leaders were asked to commit themselves in writing to the cost-cutting reforms. Officials from Greece’s “troika” of creditors have said they fear a new government may try to renege on pledges after general elections in April when hostility to austerity is also expected to grow.

The request appeared to remain a sticking point after the conservative leader Antonis Samaras, who is tipped to be next prime minister, refused to sign. Of all of Greek political leaders, he has been the most vocal in opposing the troika’s fiscal remedies emphasizing their effect on deepening an already worse-than- expected recession.

On Sunday he told parliament he would back the draconian terms of the new loan agreement solely to avoid the country “leaping into the abyss” after two years of “wrong” policies that had brought it to its knees.The latest round of belt-tightening has been met with huge opposition with furious street battles erupting as MPs voted through the bill. More than 40 deputies from the social Pasok and Samaras’ New Democracy rebelled, refusing to endorse measures they said would only exacerbate Greece’s plight.

Greece’s GDP is expected to contract by around 4% this year in what would be a fifth straight year of recession.

Racheting up the pressure, the German Finance Minister Wolfgang Schauble said Monday that the euro zone was “better prepared than two years ago” to deal with a Greek default hinting that Athens’ days in the 17-nation bloc may well be numbered. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds