Eurozone Finance Ministers Reject Greek Austerity Proposal, Make New Demands

Deal? What deal? Eurozone finance ministers rejected Greece’s proposal for a €3.3 billion package of Greek budget cuts on Friday, saying the plan is insufficient . The finance ministers also placed new conditions on Athens in order to receive the next tranche of bailout loans.

The finance ministers have made three new demands: (1) €325 million in further budget cuts, (2) approval by the Greek parliament no later than Sunday on the reform package, and (3) a pledge from the country’s political leaders to ensure that they will maintain their commitment after April elections.

The chairman of Eurozone finance ministers Jean Claude Juncker explained that the finance ministers simply cannot agree to release funds to Greece based on the current plans. "Despite the important progress achieved over the last days, we did not yet have all necessary elements on the table to take decisions today," Juncker said.

Getting approval for both current and additional austerity measures may prove difficult in Greece. Reuters is reporting this morning that Greek far-right party leader Georgios Karatzaferis announced he cannot vote for bailout agreement and has asked for reshuffle of Papademos technocrat government.

Karatzarferis said that the IMF mission Chief for Greece should be a "persona non Grata" in Greece.

Reuters noted that Karatzaferis's party has 15 deputies in the 300-seat Greek parliament. Thus, refusal by the group to vote in favor of the reforms would not prevent the bailout agreement from being passed in parliament.

The Eurozone leaders appear to be getting tougher with Greece as Athens has failed to meet expectations for the past two years. As such, Juncker said Friday that there will be "no disbursement before implementation", adding that the new conditions must be met before Eurozone finance ministers can sign off on a second bailout package for Greece next Wednesday.

The WSJ is reporting that EU Economic and Monetary Affairs Commissioner Olli Rehn said Greece's bailout funds should be placed into a special escrow account in order to guarantee bond payments and maintain some reform implementation leverage over Athens.

In addition, the FT noted Friday that Eurozone finance ministers have suggested that their involvement in the Greek economy should be more intensive in order to improve tax collection and accelerate the privatization of state-owned assets.

The proposals from the Eurozone have not been warmly greeted by the public in Greece. Two-day strikes have been planned for Friday and Saturday. Greek workers went on strike on Friday, docking ships and halting the metro and busses. Reuters reports that hospital doctors and bank employees also walked off the job, while teachers were set to join the strike this evening. Recall that the strike, called by Greece's two major labor unions that represent nearly half of the country's workforce, is scheduled to last through Saturday.

 

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