New setback for Greece bailout

15 Feb 2012, 8:35 pm   -   Source: AFP
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tThe Eurogroup was still missing information from Athens on how it plans to save a promised $A401 million. (Getty)

tThe Eurogroup was still missing information from Athens on how it plans to save a promised $A401 million. (Getty)

The eurozone gave Greece a new ultimatum and delayed a decision on a debt rescue, but China expressed support for the euro pushing up stock markets.

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The eurozone gave Greece a new ultimatum and delayed a decision on a debt rescue, but China expressed support for the euro pushing up stock markets.

The ministers called off a meeting on the rescue to avert imminent default for Greece complaining that Athens still had not fulfilled two vital conditions, with time running out for a debt restructuring.

China's top central banker meanwhile said in Beijing that the Asian giant would help Europe by continuing to buy eurozone government debt.

The eurozone put their approval of new bailout on hold late Tuesday after Greece was still at pains to come up with an extra 325 million euros ($425 million) in budget cuts.

Eurozone leaders are also demanding written pledges from Greek politicians, who face a likely snap vote in April, that all austerity measures promised to EU and IMF creditors will be implemented no matter the electoral outcome.

"I did not yet receive the required political assurances from the leaders of the Greek coalition parties on the implementation of the programme," Luxembourg Prime Minister and head of the group of eurozone finance ministers Jean-Claude Juncker said in a statement.

With the delay, previously scheduled talks in Brussels on Monday become the new deadline though government sources said that Greece will put down its assurances in a letter by Wednesday.

Global markets rose in Asia and at opening in Europe encouraged by the reassurances from China.

Central bank governor Zhou Xiaochuan repeated remarks by Premier Wen Jiabao that China was ready to get more involved in efforts to resolve the eurozone debt crisis, which is hurting demand for its exports.

"As Premier Wen Jiabao said yesterday at the China-EU summit, China will... continue to invest in European government bonds and will continue... to get more involved in solving the European debt crisis," Zhou said.

Wen had told EU president Herman Van Rompuy and European Commission president Jose Manuel Barroso that China was ready to increase its participation in the effort.

Greece desperately needs the 230-billion-euro rescue package -- 130 billion euros in fresh loans and a 100-billion-euro write down on privately-held bonds -- to avoid defaulting on 14.5 billion euros in debt owed on March 20.

A government source, after a long cabinet meeting on Tuesday, said Prime Minister Lucas Papademos would announce how he plans to come up with the 325 million euros "in the coming days."  

"The steps to take in the coming days and weeks are numerous and crucial" and will demand "an enormous and constant effort by the government," Papademos warned his ministers.

According to Greek media, part of the savings will come from a 10-percent reduction in salaries of government workers, such as military personnel, police, judges and diplomats, along with cuts in ministries budgets, including that of defence.

The eurozone wants to ensure that the bailout deals will drastically reduce Greece's debt burden, from 160 percent of gross domestic product to 120 percent in 2020.

The enormous problems confronting Greece were illustrated by new data showing that the economy, in recession for a fifth year, shrank by 7.0 percent in the fourth quarter of 2011 compared with the same period a year earlier.

The Greek parliament approved 3.2 billion euros in cuts on Sunday despite protests and riots in the streets of Athens, as Greek workers were hit by a 22-percent cut in the minimum wage.

Other hurdles remain before Greece can secure bailout funds as the German and Dutch parliaments separately need to approve it, with Berlin's vote scheduled for February 27.

Europe was also looking for outside help to resolve the debt crisis.

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