ATHENS – With signs that his coalition government is fraying, Greek Prime Minister Antonis Samaras met for urgent talks on July 31 with officials from international lenders who are pressing him to make more cost-saving measures. Samaras was unable to reach an agreement with his partners, PASOK Socialist leader Evangelos Venizelos and Democratic Left head Fotis Kouvelis, over where the bulk of some $14.16 billion in cuts should be made.
The details of their plan have been largely kept secret and now will not be revealed until later in August, prompting inspectors from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) to say they will stay until it is done. Greece is surviving on a first series of $152 billion in rescue loans and awaiting the last installment of $38.8 billion next month, without which it won’t be able to pay its workers and pensioners. A second bailout of $173 billion is on hold until the Samaras government imposes more austerity measures and agrees on where the spending cuts should be made.
Samaras, Venizelos and Kouvelis had agreed on about $9 billion in cuts in previous talks, but media reports said the negotiations are breaking down over the Prime Minister’s insistence on following the orders of the Troika, although he has gone back and forth over whether he wanted to re-open talks with the lenders.
Venizelos and Kouvelis, apparently wary over a backlash against their support for more austerity measures that have worsened a five-year recession and put Greeks on the streets in constant protests, strike and riots, have argued that the country needs at least two more years, or until 2016, to meet the Troika’s fiscal targets and that only half the cuts should be made now. Both have promised there would be no more pay cuts, tax hikes and slashed pensions, although initial reports indicated all those are set to come.
Venizelos was also going to meet with the Troika separately and reportedly to push for the ECB to take big losses on its holdings of Greek bonds, similar to the strategy he employed as finance minister in a previous government when he made private investors suffer 74 percent losses – including small bondholders in the Diaspora who had put their savings into helping Greece. The so-called Private Sector Involvement (PSI) deal has effectively locked Greece out of the private borrowing markets, potentially for years, and left the country dependent on welfare aid from the Troika, which required an escrow account to be set up so that all tax revenues go to pay back banks and foreign investors first.
Samaras, Finance Minister Yiannis Stournaras and Alternate Finance Minister Christos Staikouras met with the Troika “to clarify certain issues,” the Premier’s office said without revealing details. The Prime Minister reportedly said the government must come up with a plan to make the cuts as soon as possible or risk jeopardizing continued aid.
Stournaras was said to have told Venizelos and Kouvelis, who are anxious to avoid political fallout from supporting the government, that “Either we take the necessary measures or we return to the drachma within two months,” which Samaras said could lead to the country’s collapse. Greece is one of 17 countries in the Eurozone using the euro as a currency. Stournaras said that the government was “searching for the perfect mixture” to find measures that will reduce the country’s staggering $460 billion debt and lower its deficit.
Staikouras: Cash reserves drying up
Staikouras reported that the country is fast running out of cash and cannot survive without the continued loans. Greece does not have enough money to pay a 3.2 billion euros, or $3.93 billion, loan in August and said it needs another loan to pay that loan.
“Cash reserves are almost zero. It is risky to say until when (they will last) as it always depends on the budget execution, revenues and expenditure,” Staikouras told state NET television. “But we are certainly on the brink, we did not receive the aid tranche we were supposed to and we have the pending issue of an ECB bond maturing on August 20th,” the 3.2 billion euros loan repayment, he said. The austerity measures have decreased expected tax revenues despite big tax hikes and beleaguered Greeks have slowed spending almost to a stop, and successive governments have borrowed from one source to pay another, hoping to stave off bankruptcy and default.
(Sources: Kathimerini, Athens News, AMNA)