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LUXEMBOURG, Oct 4, 2011 (AFP)
Eurozone partners on Monday put back a decision on whether to resume bailout funding for Greece, but categorically ruled out any chance of default.

Eurogroup chairman Jean-Claude Juncker said currency partners had asked the Greek government to take moves to ensure further savings in 2013 and 2014.

That would then lead to a “definite and final decision in the course of October,” because Greece said it does not need eight billion euros in blocked loans until November.

Juncker said he “firmly denied” any suggestion that Greece would be allowed to default on its debts, and revealed that an agreement was reached among the 17 eurozone states to reduce the return on loans made by states demanding collateral first.

He called for “rapid legislation and entry into force” of a new 2012 budget and the extra measures sought for subsequent years, with the Greek parliament set to vote on the changes at the start of November.

The other main worry, Slovakia dragging its heels in ratifying changes to the eurozone’s rescue fund, was also removed after talks with the Slovakian prime minister, Juncker said.

Asked if he was confident Bratislava would not torpedo the vote, with only Malta and the Netherlands also still to rubber stamp a July deal, Juncker gave an emphatic “yes.”

The European Financial Stability Facility, meanwhile, would discuss further ideas for how to ramp up the effectiveness of the 440-billion-euro fund, after talks about possible “leveraging,” to multiply its firepower.

Don’t make us ‘scapegoat’ for debt woes says Greece
04 October 2011, 00:22 CET

(LUXEMBOURG) – Greece should not be made a “scapegoat” for wider eurozone debt woes, its finance minister said on Monday as finance ministers met in Luxembourg seeking to unblock hold-ups to promised bailout funds for Athens.

But Greece’s admission that it would not meet its fiscal deficit target this year cast a shadow over the talks, roiled markets further and raised fresh doubt on a planned second bailout.

Meanwhile, efforts by international lenders to determine if the flow of bailout funds can resume after an abrupt halt a month ago will not be complete, “before the end of the week,” a European Commission official said.

Amadeu Altafaj, the spokesman for European Union Economic Affairs Commissioner Olli Rehn, was directly citing the European Commission representative with the “troika” of inspectors from the EU executive, the European Central Bank and the International Monetary Fund currently in Athens for as assessment.

A diplomat also told AFP that, thanks to Greece’s new budget plans including temporary public sector lay-offs, the need to pay out before Athens runs out of money has been exaggerated.

“The view in there is it can wait until November,” he said.

The Greek parliament is unlikely to vote on the government’s new 2012 budget until November.

“Greece is a country with structural difficulties. But Greece is not the scapegoat of the euro area,” Venizelos said, citing a cumulative recession over three years that has seen its economy shed 12 percent of its value.

Some governments are worrying about how much they will have to give their banks in the event of a Greek default.

The eurozone’s willingness to wait: originally an eight-billion-euro slice of last year’s 110-billion EU-IMF bailout was to have been handed over in September — was in stark contrast to the reaction of global markets.

The euro hit its lowest point against the dollar since January at one point on Monday and markets tumbled.

Venizelos, also deputy premier, had announced on the eve of the two-day talks that his country would fail to meet deficit targets, with the economy expected to shrink 2.5 percent.

On top of these broken engagements and a debt pile now well above 350 billion euros, there are also concerns about potential difficulties getting the parliamentary arithmetic.

When Greece last voted a new budget in the summer, central Athens ground to a standstill as protests degenerated into sometimes violent clashes with riot police firing tear gas.

And Prime Minister George Papandreou’s slim majority, just a handful of MPs, failed to hold in some of the votes.

The United States and other major economies want money to keep flowing into Athens, to avoid a default they fear could trigger global recession.

“Our experience shows that extremely tough fiscal adjustments only worsen stagnation, the loss of opportunities and unemployment,” Brazil President Dilma Rousseff said Monday in Brussels, referring to the strategy adopted by bankrupt Latin American nations in the 1980s.

While the eight billion is the key hurdle, there are others if Greece is to receive a second cash infusion, promised in July to the tune of 160 billion in new loans and old debt write-offs.

Malta, the Netherlands and Slovakia have still to vote through changes that would allow a eurozone rescue fund set up after Greece’s problems first came to light to put its full 440 billion of government guarantees to most effective use.

The first two are not considered problematic, but rising disquiet in Slovakia — which already sat out the first bailout — means it may not even vote before a summit of European Union leaders in Brussels on October 17 and 18.

Global pressure is on to resolve the problems before G20 leaders meet in Cannes, France, on November 3-4, after a warm-up gathering of finance ministers in Paris on October 14-15.

A US-led clamour for the eurozone fund to morph into a money-market machine allowing it to “leverage” another four or five euros for every one it has at its disposal made little headway, officials said.

Rehn said such ideas could be a way to “get more out of it and make it more effective as a financial firewall,” but Luxembourg’s Luc Frieden said this was not an issue for the short term.

En route to the talks, British finance minister George Osborne said the eurozone needed to boost its defensive firepower, needed to shore up its banks once more and ultimately “decide what they are going to do with Greece — and stick to it.”


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