Greece to clarify bailout issues, party leader signs up

By @ibtimes on

Greek conservative leader Antonis Samaras has sent a letter to the European Union and IMF committing himself to implementing a new austerity package, his party said on Wednesday, as Athens rushed to salvage the deal.

The Eurogroup of euro zone finance ministers had demanded a commitment from Greece's main political leaders as a condition for a 130 billion euro (108.4 billion pound) bailout.

The ministers are due to discuss the bailout by conference call at 4 p.m. British time.

Greece is running out of time to secure the funds and avert a chaotic default next month that would send shockwaves through the euro zone.

If Nea Demokratia (New Democracy) wins the next election in Greece, we will remain committed to the Program's objectives, targets and key policies as described in the MoU/MEFP, Samaras wrote, referring to the Memorandum of Understanding on the deal and the Memorandum of Economic and Financial Policies.

But he added that policy modifications might be required to guarantee the full programme's implementation.

Earlier, Finance Minister Evangelos Venizelos said Greece would clarify all outstanding issues by the time the euro zone ministerial call takes place.

Finance ministers cancelled face-to-face talks on Wednesday, saying they had yet to receive written pledges from all Greek party leaders to stick to punishing spending cuts, or clarification of all the savings .

There are only a few remaining issues, which will be fully clarified by the time of the Eurogroup conference call, Venizelos told reporters in Athens. There are now powers in Europe who are obviously playing with fire because they believe ... that not all requirements will be met, and who may even want Greece out of the euro zone, he said.

Greek lawmakers adopted 3.3 billion euros in wage, pension and jobs cuts on Monday as rioters torched buildings across central Athens.

The Eurogroup is due to meet next Monday, but Greece has said it must initiate a debt swap deal with private sector bondholders by Friday if it is to meet a March 20 deadline for 14.5 billion euros in debt repayments.

European Union patience is near breaking point and euro zone paymaster Germany in particular is sceptical that Greek leaders will implement the savage spending cuts after an election expected in April.

After a series of broken promises since Athens was first bailed out in May 2010, trust is in short supply.

When you look at the internal political discussions in Greece and the opinion polls, then you have to ask who will really guarantee after the elections ... that Greece will stand by what we are now agreeing with Greece, German Finance Minister Wolfgang Schaeuble told SWR2 radio.

I am also not yet sure that all political parties in Greece are aware of their responsibility for the difficult situation their country is in, Schaeuble said, adding the EU remained committed to helping Greece if it honoured its promises.

European Central Bank board member Joerg Asmussen said a green light from the Eurogroup next Monday would still leave time for a sovereign debt swap to be completed in time.

If the Eurogroup (of euro zone finance ministers) is able to make a positive political decision next Monday, the bond swap with voluntary PSI (private sector involvement) can immediately begin and be completed in time, he told Reuters.

He further said in an emailed interview that while the ECB cannot contribute directly to the new Greek package, it could pass any profits from its sovereign bond purchases on to central banks in euro-zone states, which could then use it for Greece.

ALL EYES ON SAMARAS

Doubt had focused on Samaras, Greece's likely next prime minister and a strong critic of the austerity measures.

He voted for the spending cuts but says the new round of austerity could plunge the country, already in its fifth year of recession, into an even bigger slump.

He indicated during the parliamentary debate on Sunday that he would try to renegotiate parts of the bailout deal that do not work, increasing doubt in the minds of European leaders.

The Eurogroup has also asked Greece to clarify how it would fill a 325-million-euro gap in the 2012 budget cuts.

It's true we are asking the Greeks for some extremely painful sacrifices and I understand their anger, but Greece has made many errors in its past, French Foreign Minister Alain Juppe told France Info radio on Wednesday.

It (the bailout) must be concluded because if Greece went bankrupt and left the euro zone, the chaos would be even worse for the Greek people and very bad news for the euro zone.

The EU and IMF want Greece to account for every cent of budget cuts before they approve the rescue, which includes a bond swap, cutting the real value of private sector investors' bond holdings by some 70 percent.

But Greece's downward economic spiral has accelerated. Data on Tuesday showed that the economy shrank by seven percent year-on-year in the fourth quarter of last year, even more than the five percent contraction of the third quarter.

Greece is well on its way to suffering one of the biggest slumps of modern history. Gross domestic product has contracted 16 percent from its peak in 2008 and the cuts will make that worse.

Prime Minister Lucas Papademos has said that failure to back the bailout would consign Greece to economic catastrophe.

But with many Greeks suffering huge cuts in their living standards and young people burning and wrecking almost 100 Athens buildings in one night on Sunday, some people believe the catastrophe is already under way.

On the current path - which is not sustainable in my view - we may very well see Greek GDP go down 25-30 percent, which would be historically unprecedented. It's a disastrous crisis for them, said Uri Dadush, at the Carnegie Endowment think tank in Washington.

($1 = 0.7616 euros)

(Additional reporting by Harry Papachristou and Lefteris Papadimas in Athens, John Irish in Paris, Alan Wheatley and Scott Barber in London; Writing by Matt Robinson; Editing by Mike Peacock)

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