Al Jazeera takes a closer look at why the eurozone debt crisis matters, and possible solutions to the problem.
|Finance ministers in Brussels hoped to convince investors to accept deep losses on their Greek bond holdings [Reuters]|
France and Germany have pressed for a rapid deal between Greece and its private creditors that would cut its rising debt to sustainable levels.
The two countries said at Monday’s meeting in Brussels that they remained committed to sealing a new bailout deal for Greece by March to avert a disastrous default which could push Greece out of the 17-member eurozone.
Before the meeting of eurozone finance ministers in the Belgian capital, Francois Baroin, the French finance minister, said that a deal to convince banks and investment funds that own Greek debt to accept deep losses on their holdings appeared to be “taking shape”.
Baroin’s German counterpart, Wolfgang Schaeuble, on the other hand, said that any deal must help Greece cut its debt to “not much more than 120 per cent of GDP” by the end of the decade.
Greece’s current debt rate stands at roughly 160 per cent of its gross domestic product. Many economists believe the much-needed 40 per cent drop will not be achieved by the existing plan.
“The negotiations will be difficult, but we want the second programme for Greece to be implemented in March so that the
second [bailout] tranche can be released,” Schaeuble said in Paris, speaking alongside Baroin and the heads of the German and French central banks.
‘Not overly happy’
Referring to calls by the finance chiefs that Greece’s public creditors take bigger losses on bonds, Maria Fekter, the Austrian finance minister, said: “We know that the banks are not overly happy, but a crash is far more expensive than such a long-term plan”.
The finance ministers were expected to discuss a treaty, known as the fiscal compact, at Monday’s meeting.
The original draft of the treaty imposed stricter budget rules on member states to secure firm backing for the agreement from the European Central Bank (ECB).
|Tim Friend reports on Greeks’ waning faith in the state|
Joerg Asmussen, an ECB board member, spoke on January 12 of a “substantial watering down” of discipline in the latest draft of the treaty due to the inclusion of an “escape clause” allowing countries to overspend in extraordinary circumstances.
The ECB warning falls in line with the words of Christine Lagarde, managing director of the International Monetary Fund, who said at a Berlin speech on Monday that several countries party to the 17-member eurozone “have no choice but to tighten finances tightly, sharply, and without compromising”.
Asmussen also said Mario Draghi, the ECB president, met the president of the European Council and the chairman of the EU summits earlier in the day to discuss his concerns about the wording of the treaty.
Draghi had originally supported the central points of the treaty based on the agreement at the last EU leader’s summit in December. However, the original text has seen an overhaul by the European Commission and the eurozone’s member states.
ECB support of the compact is critical amid concerns that the central bank could scale back, or not deliver on, its purchasing of Spanish and Italian bonds based on disatisfaction with the steps taken by the nations in question.
Of its plans to address the nation’s financial woes, Luis de Guindos, the Spanish economy minister, said his country was embarking on “a two-pronged approach: austerity on the one hand and economic growth on the other.”
Against this backdrop, in another of the eurozone’s heavily indebted nations, police said on Monday that they had uncovered more than $65bn in undeclared revenues last year after cracking down on tax cheats.
A statement said more than 8bn euros ($10.3bn) of value added tax were also not returned to state coffers.
The statement went on to say that action had been taken against over 12,000 people accused of fraud in the past year.
Over $27bn (20bn euros) of the undeclared earnings were found overseas, mainly in tax havens.
According to estimates, Italy loses between 120bn and 150bn euros in annual revenues due to tax fraud.
In other signs of financial trouble, lorry drivers and taxis across Italy caused disruptions nationwide when they went on strike on Monday.
The lorry drivers went on strike against increased fuel prices while the taxis were protesting against government efforts to increase competition.