August 19, 2022

Greek Talks Pave Way for Fresh Bailout Funds

A statement from the International Monetary Fund, the European Commission and the European Central Bank said on Friday that Greece had agreed to the measures, which include a new austerity plan and the creation of an independent fund to privatize 50 billion euros in state assets.

The next installment of international aid under the original bailout, which had been in doubt, “will become available, most likely, in early July,” it added.

Meanwhile, Jean-Claude Juncker, who heads a group of European finance ministers, said in Luxembourg that he expected his colleagues to agree on further aid for Greece. Fresh money would be provided under “strict conditionality,” Mr. Juncker said after a meeting with the Greek prime minister, George A. Papandreou.

“This conditionality will include private-sector agreements on a voluntary basis,” said Mr. Juncker, suggesting that any new European package would include a voluntary pledge by private investors to extend the maturity of Greek debt.

Mr. Juncker also highlighted “with satisfaction” the fact that Greece was willing to set up a new fund to manage privatization.

While the announcement on Friday left many details unknown, it clears the path toward a second bailout for Greece, a little more than a year after an international rescue worth 110 billion euros, or $159 billion at current exchange rates.

Officials have been considering whether to make additional loans of up to 60 billion euros to give Greece more breathing room while it struggles with a deep economic downturn.

But several euro zone countries, including the Netherlands, had made it clear that if the I.M.F did not make available its share of the next installment of original aid, worth 12 billion euros, they would not step in to make up the difference, let alone offer further help.

Under its internal rules, the I.M.F is unable to make such a payment if there is a financing gap in the Greek government’s budget plans.

A low level of economic growth has widened the hole in the Greek budget, which has in turn prompted a scramble for more cost-cutting measures.

The talks that concluded Friday addressed that issue. The Greek government is set to announce a new austerity plan that envisions raising 6.4 billion euros through spending cuts and tax increases this year. That is in addition to the plan to raise 50 billion euros by 2015 through privatizations.

The ministry said the additional measures would be discussed by the government “in the coming days” before being voted on in Parliament.

European officials view Greece’s privatization program as central to averting a default. They have been so concerned at the slow pace of asset sales that the Netherlands proposed the creation of an outside agency to manage it.

Though the announcement did not state that European officials would be involved in the process, there were suggestions that the Greek government would tap outside experts.

Olli Rehn, the European commissioner for economic and monetary affairs, said he was open “to explore possibilities for further and reinforced assistance should there be a need, for instance in taxation and privatization matters.”

The announcement came amid mounting public opposition in Greece to its austerity drive and growing rifts within the governing Socialist Party, which has failed in two attempts to secure a broad political consensus for more austerity measures.

European Union and International Monetary Fund officials have pushed the government to persuade all political parties to sign on to the measures to ease their adoption.

The Socialist government has a comfortable six-seat majority in Parliament, but several Socialist lawmakers have suggested they might vote against the new austerity proposals.

A letter sent to Mr. Papandreou on Thursday by 16 Socialist members of Parliament framed the question being posed continually in the Greek media: “A year after signing the memorandum, we are at a crucial juncture again. Why?”

Public opposition to the new measures has been clear. Thousands of Greeks, including many young people, filled the main square outside Parliament for a 10th day Friday, calling on the government to revoke the austerity measures and for foreign creditors to “go home.” The protests have been small by Greek standards but are growing in intensity, and there have been sporadic incidents of stone-throwing at politicians.

Government officials have said that some of those incidents have been orchestrated by the Communist Party and Syriza, the radical left party, which are both represented in Parliament.

On Friday, members of PAME, the Communist-affiliated labor union, stormed the Finance Ministry offices, which are opposite Parliament, and strung up a banner calling for “an organized overthrow” and strike action.

The country’s main labor union, GSEE, which represents around two million workers, has called a one-day strike for June 9 and is joining the civil servants’ union, which represents about 800,000 people, for a general strike on June 15.

Niki Kitsantonis reported from Athens and Stephen Castle from London.

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