Greece; Austerity cuts 'a crucial step'

Athens burns and the Parliament has agreed to sell Greece for  another bit of sticking plaster - and the markets are coptimistic!

I suppose we will have to wait until March for the next installment while Greece continues to collapse in front of our eyes

Greece's hopes for quick bailout agreement dashed

European commissioner Olli Rehn says the cuts agreed by Athens at the weekend were a 'crucial step' – but the final decision looks set to be delayed until 1 March

the Guardian,

13 February 2012 17.40 GMT

Greece's hopes of quickly securing a €130bn bailout looked to be dashed on Monday after a weekend of rioting and parliamentary tumult when the Papademos government pushed through a new austerity package

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Eurozone finance ministers are expected to meet in Brussels on Wednesday and had been preparing to endorse the rescue programme for Greece.

But in the wake of the drama in Athens, it became clear that the eurozone was not yet ready to wave through Greece's second bailout in two years. Olli Rehn, the European commissioner for monetary affairs, made plain that the Athens vote was not a clincher.

It was a "crucial step" towards qualifying for the second "programme", but not the final step. It looked as though a definitive decision would be left to an EU summit on 1 March.

The German parliament has to support the new bailout and will not debate it until 27 February. Eurozone finance ministers met last week, postponed a Greek decision, delivered an ultimatum to Athens on what it had to do, and called another meeting for Wednesday that had been expected to agree the bailout. But the best that Greece can now hope for is an agreement "in principle".

The financial markets welcomed Sunday's positive vote in Greece with the FTSE 100 in London adding another 53 points, or 0.9%, to close at 5905.7, continuing the strong new year rally. The Dow Jones industrial average was also up on Wall Street, recording a gain of more than 50 points or 0.4% in morning trading.

Despite the Athens vote for a further €3.3bn (£2.76bn) in savings, Rehn said the Greeks still had to identify how they were going to close a €325m funding gap in the plans.

And Greece's key political leaders still have to deliver a signed acceptance of the orders from the troika of the European commission, European Central Bank, and International Monetary Fund who have drafted the programme of Greek cuts. This is to ensure that Greece's political leaders cannot renege on the deal regardless of the outcome of elections expected in April. 

The key player here is Antonis Samaras, leader of the conservative New Democracy who is tipped to be the next prime minister.

Samaras has regularly voiced criticism of the austerity policies although he voted for them on Sunday. Last week he refused to agree to further cuts in supplementary pensions, meaning that the projected savings were €325m short.

On Monday he again said the agreements with the troika should be renegotiated following the elections.

The commission responded that "clear and unequivocal commitments" were needed from Greece's leaders on the terms of the bailout deal.

"We expect to receive clear assurances from political party leaders before they embark on the political campaign for the next election," said Rehn's spokesman, Amadeu Altafaj Tardio.

A government minister from a eurozone country sympathetic to Greece's plight complained that the eurozone was constantly shifting the goal posts in its dealings with Athens.

Eurozone ministers are also unlikely to sign off on the bailout until they know the details of a debt swap agreement with Greece's private creditors aimed at halving the country's privately-held debt to €100bn.

Evangelos Venizelos, the Greek finance minister, said that the debt accord has to be concluded by Friday if Greece is to meet a 20 March deadline for redeeming €14.5bn of debt.

And once all the pieces of the jigsaw are in place, the IMF has to rule whether the overall plan can achieve its aim – cutting Greek debt from 160% to 120% of gross domestic product by 2020.