Brussels, 06/02/2012 (Agence Europe) - On Monday 6 February, the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, said that the interest payments on the EU's loans to Greece as part of the second bailout programme should be paid into a special “blocked” account which would serve as a guarantee fund for the repayment of Greece's debt. They were speaking in Paris after a joint meeting there of French and German ministers. Merkel said that the money had to be kept permanently available. If the idea is endorsed by the Eurogroup, it would amount to extra aid to Greece from its international backers and seems to suggest that the second bailout will not be in excess of the initially planned €130 billion. Several private and public sector Greek trade unions have called a general strike on Tuesday 7 February.
France and Germany are upping the pressure on the Greek government to get it to reach agreement with the troika of international lenders (the European Commission, the ECB and the IMF) on structural reforms as a precondition for the aid and to get the government to agree with private lenders on a voluntary write-down of some of their Greek bonds to the tune of €100bn in total. Sarkozy said that time was running out and there were only a few days left so agreement had to be reached.
The Greek prime minister, Lucas Papademos, was in extended talks on Monday with the troika to try and reach agreement between the Greek political parties (PASOK - socialists, the New Democracy conservative party and the far right - LAOS) in the coalition government. On Sunday, he said that the three parties had reached agreement on spending cuts worth 1.5% of GDP in 2012, ensuring the viability of additional pension funds, boosting competitiveness by cutting pay and other labour costs and bank recapitalisation in the public interest. The New Democracy leader, Antonis Samaras, criticised the troika on Sunday for calling for Greece to enter deeper recession. Europe is calling on the three parties in the government to promise to implement the second bailout no matter who wins the general elections in a few months' time
The hope of agreement at the weekend on the second bailout was quashed because of deadlock over the idea of pay cuts in the private sector that the troika is insisting on. The half-expected meeting of the Eurogroup on Monday to discuss a deal in Greece had to be abandoned, but it might be convened later in the week. A spokesperson for EU Commissioner for the Euro Olli Rehn said there was no point getting ministers to come to a meeting when there is nothing tangible to discuss, regretting that the deadline for agreeing on the bailout had been missed.
Greece has to roll over €15bn of its debt by the end of March and to this end, it has to reach agreement on the second structural adjustment plan if it wants to receive the second bailout cash to honour its debts with the private sector. The structural adjustment plan will involve a write-down in the face value of Greek bonds, which is due to start next week (the details have almost been decided upon now that the private sector has agreed to a lower interest rate on the replacement bonds). The write-down is supposed to reduce the Greek debt from 160% of GDP to 120% by 2020, but before it takes place, the Greek parliament must sign up to the second structural adjustment programme, which must also be endorsed by the Eurogroup and the IMF.
Minimum wage in private sector. The toughest talks are about the minimum wage in the private sector. The troika of lenders is calling on the Greek government to cut the minimum wage by 20% and wants to reduce the payment of the traditional two months' bonus and additional pensions. Pay is one of the areas on the table said a spokesperson for Olli Rehn. In Greece, the average minimum wage in the private sector is €870 a month, compared with €566 in Portugal and €748 in Spain, added the Commission spokesperson.
The European Trade Union Confederation says it is unacceptable to reduce the minimum wage in Greece because this would amount to a smashing of agreements reached by national collective bargaining and a violation of the International Labour Bureau agreements (see separate article).
In addition to sorting out Greek finances and encouraging economic growth, the second Greek bailout aims to ensure that decisions are actually put into practice. Rehn's spokesperson said there had been delays in the privatisation programme and structural reforms and a mismatch between budget decisions and their outcome in practice. He added that Greece had lived beyond its means fore a very long time and if it had not been part of the eurozone, it would have gone bankrupt already because it would not have received such unprecedented high levels of aid. In return for the aid, however, Greece must carry out its promises in order to remain credible. (MB/transl.fl)