In the early hours of Tuesday, euro zone finance ministers called Greece’s bluff.
After several hours of talks, Jean-Claude Juncker, the head of the Eurogroup, an organization of the euro zone’s 17 finance ministers, emerged to say that a meeting he had only recently scheduled for Oct. 13, where the group was supposed to consider releasing the cash, was now canceled.
At a news conference, he made it clear Greece would have to wait until November at the earliest, and hinted that the terms of a second Greek bailout, agreed to in July, might be reopened to require bigger write-downs by private investors.
Olli Rehn, the European Commissioner for Economic and Monetary Affairs, suggested that it was “very likely” Greece would need to push through new austerity measures as well.
Back in Athens later Tuesday, the Greek finance minister, Evangelos Venizelos, assured taxpayers that the country did, after all, have enough money to last into mid-November. Asked at a news conference what had changed, Mr. Venizelos said there had never been an official deadline. He also said that no new austerity measures would be introduced, insisting that those already announced would be adequate “as long as the state mechanism functions and we see cooperation by citizens.”
During an interview, the deputy finance minister, Pantelis Economou, said the extra breathing room might reflect a better-than-anticipated state of Greek finances. Tax collection was up 3 percent in July and August, he added.
He also rebuffed talk of brinkmanship between Greece and its international lenders as “conspiracy theories.”
This latest stand-off may be partly tactical: Greece wants the next €8 billion installment, or $10.6 billion, installment of its €110 billion loan package agreed to last year. Hawks in the euro zone, led by Germany and the Netherlands, want to keep up the pressure to make sure that Greece and other vulnerable countries carry out the difficult, unpopular changes that they have promised.
At the same time, it also reflects real concerns that Greece has failed to make necessary structural changes and that, against the background of a continuing recession, its public finances cannot be made to add up.
Negotiations are under way in Athens with the so-called troika — the European Commission, the European Central Bank and the International Monetary Fund — which so far has been unable to produce the recommendation required for the money to be released. And though the odds are that ultimately they will, this is not a certainty.
“Even if the European Commission is more political and flexible, the I.M.F have to be sure the figures work to get this through their board,” said one European official, who was not authorized to speak publicly.
On Sunday, Greece acknowledged that it would miss its deficit targets for this year, partly because the recession has been worse than feared. Greek officials say that, because the shortfall has been discovered so late in the year, it is almost impossible to recover the necessary ground in 2011, so any further changes need to be undertaken in future years.
But the hardliners see a pattern.
Bailouts do not resolve the fundamental financial issues in these overstretched countries, they argue. In fact they make them worse. As one official said, as soon as the E.C.B. intervened in the summer to relieve pressure on Italy’s bonds, the Italian government tried to soften its austerity package.
According to two E.U. diplomats, the real deadline for Greece is not November, although the Greek government might have problems paying its civil servants. Instead, they say, it is December, when around €2.9 billion in bond repayments are due.
Article source: http://www.nytimes.com/2011/10/05/business/global/greece-seeks-to-quash-fears-of-imminent-default.html?partner=rss&emc=rss