parliamentary approval

Euro Zone Finance Ministers to Wrestle With Greek Debt

BRUSSELS — Finance ministers from euro area countries were scheduled to gather here on Monday evening to confront a Greek debt that still threatened to torpedo the European monetary union after three years of unbroken crisis.

But the ministers still were unlikely to sign off on a long-delayed tranche of aid for Greece ahead of a final report by the so-called troika of lenders — the European Commission, International Monetary Fund and European Central Bank — on reforms Athens agreed to make as a condition of two bailout packages totaling €240 billion, or $305 billion.

Another factor hampering the disbursement the next slice of bailout aid fro Greece is likely to be ongoing discussions over how to put the country back on track over the next decade as the economy continues to falter and violent protests flare over government-imposed austerity measures.

Reaching agreement on measures intended to make the Greek debt sustainable is a precondition for releasing the €31.5 billion tranche of aid that Greece needs to stave off bankruptcy.

Failure to disburse that money could result in the country’s disorderly exit from the euro and renewed threats to the viability of the currency.

The fragile coalition government led by Prime Minister Antonis Samaras had been expected to win parliamentary approval late Sunday for its 2013 budget, which prescribes spending cuts and tax increases worth €9.4 billion, as demanded by the troika.

Last Wednesday, the government narrowly won approval of a four-year program that attains €17 billion in budget savings through sharply reducing pensions and public-sector salaries and imposing a raft of structural reforms including an overhaul of labor laws and the opening of restricted professions to more competition.

The precarious finances of Greece will be in the spotlight again later this week when a €5 billion debt payment falls due, but the Greek public debt agency said last week that it should be able to make a special issue of treasury bills on Tuesday to cover the redemptions.

“It’s a no-brainer if I say there will be no accidental defaults,” a senior euro zone official said Friday, referring to the €5 billion payment due at the end of this week. The official spoke on condition of anonymity because of the sensitivity of the financing for markets and governments.

The amount of progress that euro zone ministers make Monday may largely depend on the completeness of the troika report, which is expected to outline Greece’s additional funding needs but probably will not be in its final form.

Greece has made “enormous efforts” to implement the austerity and reform measures needed to get its next tranche of financial assistance, but “there is a very, very high degree of plausibility that there will need to be a second round of discussions in order to finalize everything,” the euro zone official said.

Other obstacles to rapid progress on Greece include disagreement among members of the troika on how soon the huge stock of Greek debt can be brought down and put on a sustainable path.

Many analysts agree that at some point, Greece’s official lenders will have to take politically unpalatable losses, or haircuts, on their holdings of Greek debt in order to keep the country in the euro area, even if a range of other measures is taken to reduce the size of the state deficit and reform the economy.

“The euro area is at a very critical juncture” over Greece, Zsolt Darvas, a research fellow at Bruegel, a research organization, wrote in a report issued Friday. “Policy makers have to recognize the impossibility of the trilemma of no additional funding, no restructuring of official loans, and no default and exit from the euro.”

Last week, Barclays estimated that giving Greece two more years, to 2016, to reach its deficit target of 3 percent of gross domestic product, compared with a deficit of 9.1 percent of G.D.P. at the end of 2011, could cost as much as €40 billion.

Barclays said half of the extra €40 billion would be the cost of running bigger deficits for longer, while the further delay in Greece regaining access to the markets would account for about €10 billion.

It said the remaining €10 billion would come from reduced earnings from the privatization of government assets. Income from privatizations has been overestimated, the bank said, and is likely to be revised down.

“In the long run, we believe that debt sustainability will require further official sector involvement in the form of haircuts or transfers in order to avoid an excessively long period of adjustment and austerity, which would trigger social unrest, and possibly political instability and a disorderly and costly exit from the euro area,” Fabrice Montagne, a senior European economist at Barclays, wrote in a briefing note.

On Tuesday, finance ministers from the 10 European Union member states outside the euro area are to join the meeting in Brussels and attempt to overcome sharp differences over how to operate a so-called banking union.

Agreed to by the Union’s leaders in June, the new system would eventually put all 6,000 lenders in the euro zone under the supervision of the European Central Bank, instead of leaving that role exclusively to national regulators.

Some of the most difficult discussions concern Britain, which has recoiled at the prospect of the 17 euro zone countries voting as a single bloc on future banking regulations that could diminish the pre-eminence of the City of London in European finance.

The new banking rules also are a sensitive matter for central and eastern European countries that remain outside the euro area and that could be more exposed to the threat of a run on banks that do not fall under the authority of a new pan-European regulator nor are backstopped by the European Stability Mechanism bailout fund.

Niki Kitsantonis contributed reporting from Athens.

Article source: http://www.nytimes.com/2012/11/12/business/global/euro-zone-finance-ministers-to-wrestle-with-greek-debt.html?partner=rss&emc=rss

Distrust of Government Impedes Reform in Greece

Most Greeks say they have little confidence in a political class that they see as corrupt and unaccountable. A recent study by Transparency International in Greece found that 9 out of 10 Greeks believed that their politicians were corrupt, and 80 percent said that Parliament had lost credibility.

“We’re here because we have lost confidence in the present political system, which has brought us to the edge,” Christos Siveris, 35, said last week as he waved a Greek flag outside Parliament during a crucial confidence vote, which Mr. Papandreou won. “This is our Thermopylae,” he added, referring to the ancient battle in which an outnumbered army of Greek warriors held out against a Persian force before ultimately succumbing.

This week Mr. Papandreou will seek parliamentary approval for an austerity package that was agreed on Thursday with European officials and the International Monetary Fund. He is expected to succeed, despite tensions within his Socialist Party and in the face of intransigence from the center-right opposition, which was in power when Greece’s debt soared.

But as the crisis extends into a second year, a growing number of Greeks are turning a critical eye on their own government. They are questioning why members of Parliament have immunity from prosecution unless Parliament votes to lift it, and they want to see more transparency and accountability in party financing.

And having faced across-the-board wage and pension cuts, they have come to question why the lawmakers have benefits that include state cars, generous double pensions (from the government and their own professional guilds), bonuses for attending committee meetings on top of their $8,500-a-month salaries, and personal staff who are widely perceived to attend to a tradition of providing favors in exchange for votes.

In recent years, a number of former officials from both the conservative New Democracy and the Socialist Parties have been implicated in a range of corruption scandals. In one episode, which occurred when New Democracy was in power, the government approved a highly complex land swap in which a Greek Orthodox monastery on Mount Athos received prime, state-owned real estate in exchange for much less valuable land in a rural area. But to date, no officials have been charged with wrongdoing.

Such scandals “add to the frustration and the popular perception that they’re crooks,” said Costas Bakouris, the president of Transparency International’s Greek branch.

Aggravating that perception, the legislators have immunity from prosecution unless the full Parliament votes to lift it, something that has happened only 17 times out of the hundreds of requests since democracy was restored in 1974 after a military dictatorship. Even after they leave office, former lawmakers can be prosecuted only during the parliamentary session in which they are accused of breaking the law and the subsequent session.

In addition to the austerity votes, Parliament is expected to vote this week on whether to broaden an investigation into Akis Tsochatzopoulos, a former defense minister from the Socialist Party who is accused of corruption in the Greek Navy’s procurement of German submarines.

Greece’s Skai television and the related Kathimerini newspaper reported that Mr. Tsochatzopoulos had been living in one of Athens’s most exclusive areas in an apartment purchased from an offshore company. To many here, the case has come to represent everything they consider wrong about the political system, not least because as a former government minister, Mr. Tsochatzopoulos is immune from prosecution. He denies wrongdoing.

In a rare move and an acknowledgment of public sentiment, the two main parties have proposed that his immunity be lifted so that he can be prosecuted.

In another high-profile case, a former Socialist Party transport minister was charged with money-laundering this year after he admitted that he received several hundred thousand dollars from a Greek subsidiary of Siemens.

This month, Kyriakos Mitsotakis, a lawmaker from the New Democracy Party and the son of a former prime minister, caused a stir when he proposed reducing Parliament to 200 members from 300; eliminating double pensions, special payments for serving on committees and immunity for government ministers and lawmakers; and opening up the books on party finances.

“It was received extremely well by the average person on the street by not so well by my colleagues,” said Mr. Mitsotakis, a Harvard-educated former venture capitalist who is clearly positioning himself as the “new” New Democracy, not least because he has said he has criticized his party’s near total opposition to the austerity measures. (Although he, too, said he planned to vote against them.)

“We have a fundamental trust problem in Greece. We asked people to make huge sacrifices that we’re not willing to make,” he said of his colleagues. “There’s something wrong with that.”

In a nod to the growing popular outrage, Mr. Papandreou said in a speech last week that he would form a committee to look at reducing the number of Parliament members and to abolish the law protecting members from prosecution, although it remains to be seen whether he has the political capital to carry out the constitutional changes those moves would entail.

But other analysts believe that anger at the political class is deeper than the government has acknowledged and will not be easily assuaged. In Syntagma Square each night, Greeks from across the political spectrum have gathered to air their grievances. This collaboration of right and left is new in a country that endured both a civil war after World War II and a military dictatorship from 1967 to 1974.

“That’s unique for Greece,” said Nikos Alivizatos, a constitutional lawyer. “I’m not sure the politicians are conscious of that.”

Article source: http://www.nytimes.com/2011/06/26/world/europe/26greece.html?partner=rss&emc=rss

Euro Zone Finance Ministers to Wrestle With Greek Debt

Distrust of Government Impedes Reform in Greece

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