News Column

Greece Given More Time but No Money Yet

Nov. 13, 2012

James Kanter


E.U. finance ministers have given Greece two additional years, even though the decision will require extra funding.

Finance ministers from euro zone countries meeting here late Monday praised overhauls made by Greece and gave the country two more years to make budget cuts, a concession that is expected to require additional funding of nearly EUR 33 billion.

But the ministers put off until Nov. 20 any decision to give Greece a long-delayed payment worth EUR 31.5 billion, or $40 billion, so international officials and national parliaments could continue to assess the steps that the government in Athens had agreed to make as a condition of two bailout packages totaling EUR 240 billion.

In a sign that fixing the Greek economy and the euro would continue to be a rancorous process, even after three years of crisis, Jean-Claude Juncker, the prime minister of Luxembourg, and Christine Lagarde, the managing director of the International Monetary Fund, publicly disagreed on how long to give Greece to make its debts sustainable into the next decade.

Mr. Juncker told reporters at a late-night news conference that Greece should now be given until 2022 to cut its debt to 120 percent of its gross domestic product. But Ms. Lagarde immediately met that assertion with incredulity, saying there was an urgent need for steps to be taken sooner to ensure that the country's high external financing needs would be viable in the future.

"The appropriate timetable is 120 percent by 2020," said Ms. Lagarde, who shook her head and rolled her eyes at Mr. Juncker's comments. "We clearly have different views," she said, adding that keeping to that goal was vital "so that that country can be back on its feet and reaccess the private market in due course."

Speaking later in the news conference, Mr. Juncker insisted that his comment had not been "a joke."

Ms. Lagarde also was more cautious in her praise of progress made by the Greek authorities than euro area officials, including Mr. Juncker.

"From the I.M.F.'s point of view, it's critical that all chapters of the book be not only opened, but closed satisfactorily -- that means the fiscal commitments, the structural reforms, the financing and the debt sustainability analysis, which we will clearly come back to with additional work to be done in coming days," Ms. Lagarde said.

Last week, Greece's shaky coalition won a tight vote on a package of austerity measures and fiscal overhauls totaling EUR 17 billion for the next four years.

Then, early Monday, the Greek government pushed through Parliament a tough budget for 2013 that calls for cuts totaling EUR 9.4 billion to salaries, pensions and social benefits and that raised the retirement age to 67 from 65 and imposed higher taxes.

Those steps were a sign that "words have been backed by deeds," Olli I. Rehn, the E.U. commissioner for economic and monetary union, told the same news conference.

"It is time to debunk the perception that no progress has been made," said Mr. Rehn, referring to the structural changes made by Greece. "This perception is damaging, it is unfair, and it is simply wrong." Mr. Rehn gave as examples the way Greece had overhauled the disbursement of medicines and adjusted its pension system.

Failure to disburse the pending loan installment to Greece could result in a chaotic exit from the euro and threaten the currency.

But obstacles to releasing that money remain. Even when ministers do give the green light for that disbursement, the decision remains subject to approval by a number of national parliaments.

Mr. Juncker said checking that those parliamentary approvals had been made could require finance ministers to hold a teleconference or meet in person at the end of the month, in addition to their Nov. 20 meeting.

Wolfgang Schauble, the German finance official, said earlier Monday, "Seriously, thoroughness is a must, and before we decide, Germany's Bundestag has to be involved, just like in other countries."

In Greece, promised overhauls and budget cuts went off track in recent months, partly as a result of two elections in three months earlier this year. That left the government in Athens seeking more time to make changes.

Yet relaxing the terms of agreement with Greece will cost more money for lenders and put leaders of big creditors like Germany in an awkward position with voters who have grown tired of bailing out others.

A draft copy of a report by the troika of Greece's major creditors -- the European Commission, the European Central Bank and the International Monetary Fund -- that was circulating at the meeting said the bill for allowing Greece the additional time would be EUR 32.6 billion.

Addressing Greek lawmakers before the vote on the budget, Prime Minister Antonis Samaras said the new cuts would be the last, and he appealed to the troika to support his country.

"Greece has done its part," Mr. Samaras said. "Now it's the turn of the lenders."

Source: (C) 2012 International Herald Tribune. via ProQuest Information and Learning Company; All Rights Reserved

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