Eurozone leaders rule out Greek debt default

Partners put off decision on whether to resume bailout funding after a meeting on the sovereign debt crisis.

A senior European official has said eurozone members are not pushing to allow Greece to default as had been rumoured.

Jean-Claude Juncker, prime minister of Luxembourg, also said early on Tuesday that there was no suggestion that Greece would leave the eurozone.

Greece’s sovereign debt crisis has threatened the union of 17 nations who use the euro, and there have been occasional calls that letting Athens default is the only way to move past the crisis.

But Juncker emphatically denied that was a possibility after a meeting on how to save Greece.

The finance ministers did not decide whether Greece would get the next installment of its bailout loans. But they did clinch a deal on a Finnish demand for collateral before it would agree to a second bailout for Greece.

Juncker said the currency partners had asked the Greek government to make further savings in 2012 and 2013 to secure EU and IMF approval at a special eurozone meeting called for October 13, leading to a “definite and final decision in the course of October”, because Greece said it does not need 8bn euros in blocked loans until November.

Nevertheless, global stocks fell to a 15-month low on Tuesday, and Asian stocks near a 16-month low, as investors shed riskier assets.

Japan’s Nikkei fell to a 6-1/2 month low as a sell-off in commodities pushed trading houses lower. MSCI’s broadest index of Asia Pacific shares outside Japan fell 1.58 per cent, hovering near a 16-month low hit in late September. It fell about 3.6 per cent on Monday.

The MSCI All-Country World index fell 0.52 per cent to its lowest level since July 2010.

This added to declines on Monday when bank shares were battered, with Dexia calling an emergency board meeting after concerns about its exposure to Greece.

Half a billion euros were wiped off the market value of the Franco-Belgian financial group on Tuesday as investors grew increasingly concerned about its survival in its current form despite government promises to insure every cent of its deposits.

Dexia was down 24 per cent on Tuesday.

Difficult time

Al Jazeera’s Jacky Rowland, reporting from Luxembourg earlier, said Greece would have a difficult time convincing finance ministers to continue with the bailout.

“The question that the European finance ministers are asking themselves is whether Greece is a basket case,” she said.

“The Greeks themselves would say no. Their finance minister, who is in Luxembourg, said ‘yes, Greece has structural problems, but Greece is not the scapegoat of the Eurozone’.

“The problem is it is difficult to convince other minsiters of that when just 24 hours earlier you have admitted that you have missed your deficit target for 2011, and that 2012 is not looking good either.”

The summit came as Greece’s government moved to present a fresh package of budget cuts to parliament amid growing concern that the country stands on the brink of a financial collapse which could endanger the entire global economy.

The government has already said that it will miss deficit-reduction targets set by the European Union and the International Monetary Fund as a condition of bailout payments necessary to keep the Greek economy afloat, prompting stock market alarm.

Without access to the $150bn bailout fund, paid for by other eurozone countries and the IMF, analysts say Greece could run out of funds by mid-October.

Analysts fear any default on Greek debt could pitch the fragile global economy into a fresh recession.

‘Slide into bankruptcy’

Manoj Ladwa, a senior economical analyst, told Al Jazeera there was a strong possibility Greece could slide into bankruptcy at some point. That would prompt an assessment of the future of the eurozone, he said.

Athens is labouring under 350 billion euros or more of debt, with its stripped-bare economy already on its knees.

The revelation that Greece is finding it increasingly difficult to reduce its borrowings in spite of all its austerity measures has raised concerns that its international creditors could effectively pull the plug.

On Sunday, Greece’s finance ministry said the deficit this year would probably be 8.5 percent of gross domestic product, higher than the 7.8 percent previously anticipated.

The ministry blamed a deeper-than-expected recession for the failure to meet the target, with the economy contracting by 5.5 percent instead of the 3.8 percent estimate made in May.

The announcement prompted widespread selling in stock markets on Monday, as benchmark indexes in London, Paris and Frankfurt were down by about two per cent in morning trading, raising further concerns over the stability of the eurozone.

But international pressure on Greece to impose the austerity measures demanded by its creditors has provoked many in the country to protest.


Ericos Finalis, a member of the anti-austerity “Won’t pay movement”, criticised the government’s stance.

“There is a programme of social destruction in Greece,” he told Al Jazeera. “One out of four Greeks will be out of a job pretty soon.

“The entire social structure of Greece has been destroyed … the people can’t afford to pay these different taxes, families are facing huge problems.”

The Greek government’s latest measures to cut costs include plans to suspend 28,000 public sector employees on reduced pay by the end of 2011.

The programme falls short of the 30,000 reduction demanded by Greece’s creditors and offers many the prospect of early retirement on a full pension.

Those affected would be paid a fraction of their actual salary for a period of one to two years, but would be able, at the same time, to hold jobs in the private sector, if they can find them.

The cabinet has also committed itself to reducing civil service jobs by 150,000 within four years.

Source : Al Jazeera, News Agencies


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