Eurozone to meet on Greek bailout

The latest round of budget cuts, which slash the minimum wage and pensions, sparked fresh protests in Athens [AFP]

The Greek prime minister has headed to Brussels ahead of a key meeting where eurozone finance ministers will decide whether his country will receive a $170 million bailout to avert a potentially catastrophic debt default.

Leaders from Germany, Italy and Greece have said that they are optimistic that a deal for Greece’s second major bailout can be clinched, after months of delay, during Monday’s meeting.

Critics, however, have expressed doubt over whether Greek political leaders will follow through on commitments made regarding budget cuts.

The pressure remains on Lucas Papademos, the Greek prime minister, and his presence in Brussels could lend more weight to the country’s case.

Monday’s meeting could “result in the need to take very important decisions for the country and require immediate and thorough consultation between the Prime Minister and Minister of Finance,” Papademos’ office said in a statement.

He is also expected to hold talks with representatives of Greece’s private creditors on a related id=mce_marker31.59 billion debt relief deal.

Greece is straining to secure the rescue loans and debt relief measures in order to avoid defaulting on a id=mce_marker9 billion bond redemption on March 20.

The government has already pushed through a massive campaign of budget cuts and reforms through parliament, and is expected to introduce two more pieces of emergency legislation on Monday relating to wage and pension cuts.

Protests in Athens

About 60 people were detained on Sunday during scattered protests in Athens over the proposed cuts, after hundreds of police moved to disperse the demonstrators.

“Poverty and Hunger Have No Nationality,” read one banner carried by demonstrators on Syntagma square outside parliament.

“We Are Greeks, Merkel and Sarkozy Are Freaks” said another, referring to the German and French leaders.

Police said that roughly 1,500 protesters had assembled.

The latest budget cuts include a 22 per cent cut in the minimum wage, while pensions of more than id=mce_marker,700 per month will be slashed by 12 per cent, further adding to the economic hardship of ordinary Greeks.

Greece’s private and public sector unions joined forces to call Sunday’s protest, rejecting what they brand “unacceptable demands” set by the European Union and the International Monetary Fund, saying they violate workers’ rights and collective agreements.

Radical leftist parties also staged a second protest in Athens on Sunday afternoon.

“We are ashamed of our politicians, aren’t you?” said a banner in orange, the colour of a new party calling itself Creation Again.

“The measures are the worst thing that could have happened. It is outrageous. All the people are suffering. Shortly we will be asking ourselves where the bread is?” said pensioner Christos Artemis.

Meetings ongoing

As the protests took place in Athens on Sunday, high-level finance ministry officials from the 17 countries that use the euro as their common currency were already meeting in Brussels to evaluate the Greek government’s latest budget cuts, and whether these could, in conjunction with a new bailout, bring Greek sovereign debt down to a sustainable level.

One of the proposals on the table is for a separately managed account to be set up for Greece, to ensure that the country honours its debt obligations, and to insulate the eurozone from the destabilising effects of a possible default.

Such an escrow account would give legal priority to debt and interest payments over paying for government services. However, it is still unclear whether only funds from the bailout would be funneled into the account or whether Greece will also be expected to pay in some taxpayer money.

“There is agreement within the Eurogroup that there will be such a special account, or ‘escrow account’ in jargon, for the disbursement of the second aid package,” German Finance Minister Wolfgang Schaeuble told German daily Tagesspiegel’s Sunday edition. “The account ensures a priority for
debt reduction.”

Timothy Geithner, the US treasury secretary, threw Washington’s support behind the new bailout package drawn up for Greece and said the US supported the idea of a new IMF loan for Athens on Sunday.

“This is a very strong and very difficult package of reforms, deserving of support of the international community and the IMF. The United States will encourage the IMF to support this agreement,” Geithner said in a statement.