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THE GREEK GOVERNMENT has warned rebel members of its parliament that any refusal to back the latest package of austerity measures could force the country into a dangerous default.
The country’s 300 MPs will vote tomorrow on whether to back the deal reached by leaders of the national coalition earlier this week, plunging the country into further austerity.
The deal is required so that Greece can finally secure its second €130 billion bailout from the EU and IMF – without which it will be forced to default, given the bonds it must repay in the coming weeks.
A fresh package of cost-cutting measures was approved by the cabinet last night, as premier Lucas Papademos – who is only in charge of the country until a new election can be held this year – warned that a “disorderly default would plunge our country in a disastrous adventure.”
Reuters quotes deputy finance minister Filippos Sachinidis as warning that any failure to secure the deal would lead to “incalculable” consequences for Greece, putting it on “an unknown, dangerous path”.
“Let’s just ask ourselves what it would mean for the country to lose its banking system, to be cut off from imports of raw materials, pharmaceuticals, fuel, basic foodstuffs and technology,” he said.
Eurozone finance ministers, meeting earlier this week, refused to sign off on releasing the new €130bn package until the deal is ratified by the parliament.
The new package is also seen as a prerequisite in order for Greece to continue talks with its private bondholders, who have been reluctant to strike a deal on writing down the value of their bonds without Greece making a firm effort to cut its government spending.
Although the national coalition should (in theory, at least) a massive majority in the parliament, a number of figures from the 48-member cabinet have already declared their opposition to the deal.
It remains to be seen how many other ministers may yet oppose it, and how many members of the parliament they could bring with them.
Among the proposed measures are 15,000 public sector job cuts, cutting the minimum wage by around a fifth, and liberalising labour laws – including the abolition of a two-month ‘holiday pay’ bonus paid to many public servants.
The WSJ said the government also proposes to borrow €35 billion from the European Financial Stability Facility in an attempt to buy back its own bonds from the European Central Bank, in a bid to transfer debts from the ECB to the EFSF, which is more likely to be flexible on cutting interest rates or offering a write-down.
The deal has unsurprisingly been rejected by the public, with trade unions holding a 48-hour strike to coincide with this weekend’s parliamentary debates.
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Maybe it’s time to give junk status to Moody and other agencies?
If a country borrows money then it’s at their mercy. The only way to avoid them is not to borrow. Full stop.
But can you imagine the ‘budget’ we would have if the governent had to fully balance income and expenditure?. Forget about the 10 euro on childrens allowance being a concern.
Rating agencies should not be allowed to contribute to sensational journalism. It contributes to and accelerates market opinion. They should do ratings full stop. Not make statements that countries are at risk of a downgrade. How on earth can any EU country go to the bond market now and expect to have a good auction.
One has to feel there is some political agenda from inside Moodys.
Dear Moody’s, Standard & Poor et al….. Shut the hell up and jog on From, us.
Sick and tired of this lot and their self fulfilling prophecies.
So it will be a level playing field?
Completely agree with Cormac above.
Every time these agencies suggest that something may happen it causes panic, and makes the situation worse than it already may be.
They should just comment when they’re making a downgrade. They should warn those in the power in the countries that there is a risk to their creditworthiness, but leave it at that.
I know they want to make investors aware of potential problems, but it’s not helping the countries regain any sense of control of the situation, as I’ve said, it just worsens it.
Also see a political motivation – maybe my viewpoint is a bit simplistic here, but isn’t it better for currency speculators to have lots of smaller fluctuating currencies to one big steady one?
@Niall There is definitely something political going on. I’m very suspicious and wary of the rating agencies on a whole – when they choose to talk about things, when they choose to announce their downgrades.
Not quite sure regarding the currency, I’d like to agree as it would make sense. Currency, investments etc. are definitely not my strong point.
Not sure why is my name Kildare here after posting from an iPhone. TheJournal?
Hi Danny. This looks like a bug in our system – sorry! If the problem keeps happening, could you email hello@thejournal.ie? Thanks and apologies.
Pure sensationalistic attention-seeking on the part of the ratings agencies. How else can they make such sweeping statements about such a large number of countries? Within the Eurozone itself, we have countries like Estonia with a 6.5% debt to GDP ratio and Luxembourg with 19% in comparison to our place just short of the 100% mark, Greece’s 142% and Italy’s 146%.
Just a quick question for those of you with more knowledge than myself: With the euro situation getting worse by the minute and negative speculation making things even more difficult, will all of Ireland’s “best in class” behaviour have been for nothing? Just looking for honest opinions
I wouldn’t claim to know more than anyone else, but my feeling is that there was no benefit to Ireland in blindly propping up the Euro, at all costs. I think that the threat of default is about the only card we’ve got, and we should have used it judiciously to extract softer terms from the troika.
Instead, we’ve gone all in on the Euro’s survival through the policy decisions taken in the past few months – extended bank guarantee, etc. – so I sincerely do hope that it does survive, the consequences of its collapsing would be catastrophic.
have your say