Greece will need to take further steps to fix its public finances and overhaul its economy in exchange for a new multi-billion euro rescue package, the country’s prime minister warned Sunday, but added that Greece’s political leaders are united behind the effort. In remarks following an almost three-hour meeting with the heads of the three parties that make up his coalition government, Lucas Papademos said that if Greece failed to secure that new loan, the country faced imminent default with “heavy consequences” for Greek society.
“The negotiations are not easy. Despite the progress that has contributed to the stabilization of the economy; despite the significant changes and the great sacrifices of the citizens; missed goals and the delayed implementation of policies has led our partners to ask for further commitments and terms,” he said. “The political leaders and I find ourselves in absolute agreement over the need to continue the negotiations and the positions that we will support,” he added.
The meeting comes just one day before a European summit in Brussels which is expected to discuss a new multi-billion euro bailout for the country and a related reform program. On Saturday, Greece and its private sector creditors said they were on the verge of a deal to write off EUR100 billion worth of the country’s debt, paving the way for Greece to secure a fresh bailout from its European partners. In October, European leaders and the International Monetary Fund agreed to provide Greece with EUR130 billion in fresh financing to cover the country’s cash needs through 2015. But the new loan was contingent on a debt write-down plan that would slash Greece’s debt ratio to 120% of gross domestic product in 2020 from an unsustainable 160% currently.
Since being named prime minister in November, Papademos has presided over an uneasy alliance of the three parties–the Socialists, the center-right New Democracy party, and the small, nationalist Laos party–as he tries to broker both a new loan deal and a debt write down with the country’s creditors. The new loan deal is expected to include draconian new austerity measures and other reforms Greece must take to fix its public finances and liberalize its hidebound economy.
EasyForexNews Research Team