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February 09, 2012

Europe Demands Stringent Greek Acceptance of Austerity Plan

European leaders are voicing skepticism that Greece's new austerity plan will put the country on a secure economic footing and are demanding that new spending cuts be identified before they will hand the Athens government another bailout.

German finance chief Wolfgang Schaeuble told lawmakers in Berlin on Friday that the budget cuts Greece has pledged to impose would still leave the country with substantial debt - 136 percent of the country's annual economic output by 2020, well above the 120 percent figure the continent's leaders have targeted.

The finance ministers from the 17-nation bloc that uses the euro currency discussed Greece's austerity plan in Brussels on Thursday, but said they were not satisfied with it. Greece says it will trim its minimum wage by 22 percent and eliminate 15,000 government jobs. But the chief of the finance ministers, Luxembourg's Prime Minister Jean-Claude Juncker, said the Greek parliament needs to quickly approve the plan on Sunday and called for the country to pinpoint $432 million of the spending cuts it says it will impose.

"Despite the important progress achieved over the last days, we did not yet have all necessary elements on the table to take decisions today," said Juncker. "Firstly, the Greek parliament should approve on Sunday the policy package agreed between Greece and the troika.  Secondly, additional structural expenditure reductions of 325 million euros in 2012 should be rapidly identified in order to ensure that the deficit target is achieved."  

Juncker warned that Greece would not get a new $172 billion bailout, its second in two years, until it enacts the austerity plan. Greek workers have repeatedly taken to the streets of Athens, and did so again on Friday, to protest spending cuts and higher taxes that European leaders have insisted the country impose.

"No disbursement before implementation because we cannot live with a system where promises are made and repeated, and repeated, and where the implementation measures are, from time to time, too weak, so we are insisting on a real, true implementation," he said.

Greek Finance Minister Evangelos Venizelos said his country has no choice but to accede to the European demands.

"Our choice is one of humiliation for a historic and proud country, or even greater humiliation which it will face if we act under the illusion of saving face with decisions that will have a much greater social cost," said Venizelos. "The era of populism and delusion is over. We must make decisions."

In addition to seeking approval for the new bailout, Greece is seeking to cut in half the debt it owes large financial institutions - a $132 billion reduction. Greece says it needs both the debt relief and the new bailout to avoid defaulting on $19 billion in bond payments next month.

Some information for this report was provided by AFP, AP and Reuters.