Brussels, 02/08/2012 (Agence Europe) - The leaders of the two parties in the Greek coalition government - Prime Minister Antonis Samaras of New Democracy and Evangelos Venizélos of PASOK - along with the head of Democratic Left, Fotis Kouvelis, whose party backs the government but is not officially part of the coalition - reached agreement in the evening of Wednesday 1 August 2012 on some €11 billion of spending cuts in 2013 and 2014, as part of the second Greek bailout programme. Greek Finance Minister Yiannis Stournaras, who joined the leaders at their meeting, told the Financial Times that the prime minister's proposals had been accepted by the party leaders.
Talks will now take place with the troika (European Commission, ECB and IMF), whose representatives will be spending the summer in Athens and issuing findings in early September on Greece's budget and macroeconomic situation. No further aid instalments will be paid out until the troika issues its report.
Little information has emerged about the nature and scale of the cuts, the details of which are to be finalised by the end of August. Kouvelis says the leaders have been talking content rather than figures. Venizélos's argument that there should not be any further pay cuts until Greece returns to economic growth has been rejected. Greece has been in recession for five years now and GDP is expected to shrink by more than 6% in 2012. In view of Samaras' opposition to immediate renegotiation of the conditions attached to the second Greek bailout until the €11 billion cuts package was introduced, the PASOK leader finally went along with the prime minister to avoid yet more elections.
On 20 August 2012, Athens has to repay more than €3 billion of maturing debt. If its lenders do not agree to pay out the next instalment of aid by that date, then it could find itself in default of payment. The media suggest that Greece is considering issuing short-term bonds, a risky and expensive operation that was already used under the first Greek bailout. On Thursday 2 August, a Greek government spokesperson said no announcement of any kind would be forthcoming, but all financing involving Greece in August would be met.
The European Commission issued the following statement on Thursday 2 August: “The ten priorities for structural reform announced today by the minister of development are a clear sign of the commitment of the Greek government to bring about the much-needed reform of the Greek economy. This is welcome. The pursuit of these priorities will make an important contribution to the broader reforms to which Greece is committed within the MoU and which are needed to boost growth and employment. We now expect determined implementation of all of Greece's reform commitments in full respect of Union law, and in particular Single Market rules. Where relevant, the Commission Task Force will provide assistance”. (MB/transl.fl)