March 31, 2023

Euro Watch: Finance Ministers Add to Pressure on Greece Bailout

“We called on the Greek authorities to solve remaining issues so as to swiftly finalize the negotiations with the troika institutions,” the so-called Eurogroup of finance ministers said in a statement issued shortly after a scheduled conference call.

The troika, a reference to the European authorities and international lenders supervising the Greek bailout, consists of representatives from the European Commission, the International Monetary Fund and the European Central Bank.

Greece and the troika have been negotiating for weeks over an austerity budget package that would require the approval of the lenders, and be passed by the Greek Parliament, before a loan installment of €31 billion, or $40 billion, can be unlocked. Without that money, Greece could face default by the end of the month.

Greek politics continue to add uncertainty to the process. After the government on Wednesday released details of the austerity package — including raising the retirement age by two years, to 67; cutting salaries and pensions, and increasing taxes — the country’s labor unions responded by announcing a 48-hour strike next week when the parliamentary vote is expected to be held. The Democratic Left, the smallest member of Greece’s shaky three-party coalition government, has said it will not give its full support to the budget package if it includes changes to labor laws that the party opposes.

Adding to the political tension, the Parliament on Wednesday passed only narrowly a bill aimed at speeding the process of raising money by selling publicly owned Greek assets. Several members of Parliament from the Democratic Left and the other coalition partner, the Socialists, voted against the measure, and the leaders of the parties abstained. Afterward the leader of the Socialists, Evangelos Venizelos, hastily convened his party’s members of Parliament for an emergency meeting, in an apparent effort to contain dissent ahead of the vote next week on the budget package.

But Greece, in perhaps the most dire circumstances of the 17 members of the euro zone, is hardly alone in its economic problems. Data released Wednesday by the European Union indicated that euro zone unemployment set another record in September, with 18.49 million people out of work.

The jobless rate in the 17-nation currency union ticked up to 11.6 percent from 11.5 percent in August, according to Eurostat, the E.U.’s statistical agency. The August figure, which had itself been a record level for the euro zone, was revised upward from the 11.4 percent initially reported.

Meanwhile, in Portugal on Wednesday, the Parliament passed the biggest tax increases in modern Portuguese history in an effort to meet the budget targets of its European bailout program. While the nation’s center-right ruling coalition supports the tax increases, the opposition Socialists are challenging them in court.

The Eurogroup finance ministers, in their statement Wednesday on Greece, said any decision to release the next round of money “was subject to the completion of prior actions by the Greek authorities” — a reference to commitments already made by Greece to overhaul labor laws and raise the retirement age.

The group said it hoped to finish assessing Greece’s progress by Nov. 12.

“Even if the troika report has not (yet) been officially released, it seems clear that the euro zone is willing to give Greece somewhat more time for the adjustment,” Carsten Brzeski, an economist at ING Belgium, wrote in a briefing note issued Wednesday. But, he wrote, “Filling the funding gap for Greece will again require some creativity.”

Many economists still contend that without some form of debt forgiveness, Greece will ultimately have to leave the euro union.

The German finance minister, Wolfgang Schäuble, said Wednesday after the Eurogroup conference call that no decisions had been made at the meeting. He said he did not expect the next status report by Greece’s troika of lenders to be issued before Nov. 11. “There are a lot of difficult issues that still need to be resolved,” he said.

At a news conference, Mr. Schäuble said the country’s relatively strong economy and low unemployment would expand Germany’s tax receipts by €29 billion this year, for a total of €602.4 billion.

But in the European unemployment figures released Wednesday it was not Germany, with a jobless rate of 5.4 percent, that had the lowest figure. Austria, at 4.4 percent, had the lowest. Most euro zone nations are faring much worse, particularly Spain, where the jobless rate reached 25.8 percent. Close behind was Greece, at 25.1 percent in July, the most recent month for which data were available for that country.

In contrast, the United States had an unemployment rate of 7.8 percent in September, and joblessness in Britain was at 7.9 percent in the three months through August.

The euro zone economy is expected to have contracted again in the third quarter, after a 0.2 percent quarterly decline in the three months through June. With the global economy showing signs of slowing and European governments cutting spending to balance budgets, economists say the contraction could extend into next year.

David Jolly reported from Paris. Niki Kitsantonis contributed reporting from Athens, and Melissa Eddy from Berlin.

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