GREEK Prime Minister Lucas Papademos planned on Tuesday to discuss with the nation’s political leaders the implementation of additional fiscal measures needed to secure a second European Union-led bailout.
While Papademos and the party chiefs already agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors.
European leaders raised pressure on meeting the conditions of the €130-billion ($171 billion) rescue, with German Chancellor Angela Merkel saying “time is running out.”
“There are fears that the Greek government will note the country has reached the limits on austerity,” UBS AG currency analysts, including Chris Walker, in London wrote in a note to clients on Monday.
“The week ahead will be extremely significant for event risk and headlines could become a dominant driver for the euro.”
At stake is whether Greece can win the bailout, secure a deal with private creditors and remain in the euro region.
Finance Minister Evangelos Venizelos told reporters late Monday that “failure of these talks, failure of the plan, the country’s bankruptcy, means even greater sacrifice.”
The euro was little changed at $1.3118 as of 10:06 a.m. in Tokyo as investors await the outcome of the Greek talks. Asian equities were also little changed, after US and European stocks fell overnight, driving the Dow Jones Industrial Average down from an almost four-year high.
Greek political leaders have yet to resolve issues from recapitalizing banks, ensuring the viability of pension funds and reducing wages and non-wage costs to boost competitiveness. Greece still needs to agree on €600 million of fiscal measures for 2012, a government official told reporters in Athens on Monday. Meantime, unions called their first general strike of the year.
Papademos met early Monday morning with representatives from the European Commission, the European Central Bank and the International Monetary Fund to continue talks on possible spending cuts.
“The salvation of the country, remaining in the euro, means great sacrifices,” Venizelos told reporters in Athens late Monday after his meeting with the so-called troika of representatives.
With the country set to pay a €14.5- billion bond due on March 20, Merkel said in Paris that “I can’t quite understand why we need a few more days.”
French President Nicolas Sarkozy said there could be no funds without reforms. Allowing Greece to go bankrupt “isn’t an option,” he said.
Greece’s efforts to win a second bailout from the troika have hung in the balance over the past four days as negotiations in Athens failed to clinch an agreement on measures demanded by lenders, which could include a cut in the minimum wage, lower pensions and immediate layoffs for state employees.
The country was set to sell €625 million of 26-week Treasury bills on Tuesday, a week earlier than usually scheduled to allow for the rollover of 26-week bills due on the February 10. Short-term debt sales like those are the only source of market financing available for the nation. Bonds repayable in 2022 are worth about a third of their face value.
Euro-area finance chiefs told Venizelos on February 4 that an increase in the bailout package wasn’t forthcoming, underscoring their frustration at a lack of progress on fixing the economy. Keeping Greece from tumbling into default presents what Deutsche Bank AG Chief Executive Officer Josef Ackermann calls a “make or break” moment.
Venizelos described the talks in Athens as a “Hydra’s head,” a reference to the monster in Greek mythology that grew back more heads than the one cut off.
Citigroup Inc. raised the probability that Greece will be forced to leave the euro area in the next 18 months to 50 percent from 25 percent to 30 percent previously.
“To remain in the euro area, the Greek government needs to exhibit a minimum degree of compliance with the fiscal and structural conditions of the bail-out program,” Chief Economist Willem Buiter said in an e-mailed note. “The hurdles for Greece set by euro area negotiators to receive the second bail-out are high.”
Adding to pressure on Papademos and political leaders, the biggest public-sector and private-sector union groups, Adedy and GSEE, held a 24-hour general strike on Tuesday, shutting down government services, courts, schools and ferry services. Dockworkers and bank employees will also walk off the job while a walkout by culture ministry workers will force the closure of museums and other tourist attractions.
Public transport in Athens would operate during the day to bring protestors to the city center. Workers from the state-run Hellenic Railways Organization, one of the biggest loss-making state-owned companies, will shut down rail service across the country.
“What is taking place isn’t a negotiation,” GSEE president Yannis Panagopoulos said in an e-mailed statement. “It’s raw, cynical blackmail against a whole people.”
Administration Minister Dimitris Reppas said the troika asked for 15,000 state jobs to be cut this year, part of plans by Greece to gradually phase out 150,000 employees by the end of 2015. He told Athens-based Mega TV he was opposed to “blind firings.”
