July 28, 2021

Greek Coalition Partners to Back New Reforms

Prime Minister Lucas Papademos had sought agreement among coalition partners on the broad outlines of a deal with private creditors to erase $130 billion of debt as well as a recovery plan suggested by the European Commission, European Central Bank and International Monetary Fund, collectively known as the troika.

Athens had reported progress over the weekend between Greece’s political leadership and Charles Dallara of the Institute of International Finance, the bankers’ lobby representing most investors, regarding how much of a loss the private sector creditors would be willing to accept on their bond holdings. A deal is expected within days.

The statements on Sunday by Greece’s technocrat premier suggested that he had overcome some of the objections of the party leaders — his Socialist predecessor George Papandreou, the conservative leader Antonis Samaras and the right-wing leader Georgios Karatzaferis — to new austerity measures proposed by the troika, although some points of contention remain.

The three party leaders were later quoted on Sunday as saying that their only objections were to proposed cuts to wages in the private sector — which would intensify a deep recession — and to reported German demands for a European Union commissioner to oversee Greek budget decisions.

Still, any new measures could face a struggle to pass the Parliament, where many lawmakers remain resistant to unpopular measures.

Mr. Papademos said that the alternative to the completion of talks on the debt swap and on a second bailout for Greece was a potentially catastrophic default.

“If this process is not completed successfully, we will find ourselves faced with the specter of bankruptcy, which will have serious repercussions for society and especially for the economically vulnerable,” he said.

The talks with private creditors have broken down twice before, largely because the International Monetary Fund and European leaders have pushed for greater debt reduction in light of Greece’s worsening economic outlook, so there is again the possibility that these negotiations will founder.

Reining in Greece’s budget problems will not be the only item Monday in Brussels.

Leaders are expected to bow to mounting evidence that austerity alone risks stoking recession and plunging fragile economies into a downward spiral; a draft of the European Union summit meeting communiqué calls for “growth-friendly consolidation and job-friendly growth.”

Leaders will discuss long-term structural reforms and better use of European Union subsidies, while avoiding mention of fiscal stimulus from Germany, the powerhouse of the euro zone.

Then the meeting, which will be held at the same time as a national strike in Belgium, will try to satisfy Berlin’s desire for fiscal discipline by wrapping up talks on a new intergovernmental treaty.

Meanwhile, several nations are also expected to champion the need for a financial transaction tax, a plan that one official study suggested could cut growth.

Stephen Castle contributed reporting from Brussels.

Article source: http://feeds.nytimes.com/click.phdo?i=2b89d18b4bbd8a165b042f88551abf15

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