ANALYSIS:EUROPEAN LEADERS have readied the ground for a second Greek bailout, but uncertainty surrounds the country's fate – and that of the euro zone – as MPs prepare to vote on a €78 billion austerity and privatisation plan.
EU leaders have implored prime minister George Papandreou to ensure the passage of key legislation in parliament next week. Even if he does, however, the focus for a long time to come will be fixed on his epic struggle to bring the wayward Greek economy to heel.
Nothing further can happen in the rescue effort until MPs cast their ballots next week. Still, the summit and simultaneous action back in Athens served to provide some clarity over the likely course of events in the coming fortnight.
As the leaders came down heavy on Papandreou over dinner on Thursday night, his finance minister Evangelos Venizelos was engaged in more talks in Athens with the EU/IMF/ECB “troika”.
The inspectors were back in town to verify that the package MPs vote on next week coheres with the deal they struck with Papandreou only three weeks ago. As it happened, the government’s proposed measures fell short of the troika’s €28 billion target by about €4 billion. The Greeks had to dig deep again, but secured a little leeway on the income threshold at which workers pay tax.
These engagements, which continued into the early hours yesterday, also provided a level of clarity over the voting procedure next week. There will be two votes: the first, on Tuesday, on the fiscal consolidation and privatisation plan; the second, on Thursday, on the law to implement the measures.
A rejection of either would be fatal to Papandreou, casting doubt over the release of a €12 billion loan next month and the second bailout. This carries grave risks of spillover for Ireland, something Taoiseach Enda Kenny raised with his counterparts. Mr Kenny said he sought and received reassurance that Europe would not allow Ireland to be swept away in such an eventuality. He did not specify the nature of the reassurances.
No matter what Papandreou says, EU leaders continue to fret that he might not be able to muster enough support in parliament.
It was at his instigation that a communique by the leaders on Thursday declared they were “conscious of the efforts that the adjustment measures entail for the Greek citizens”. Such words may not go down well with the “Indignant” denizens of the Syntagma Square, but they reflect a level of concern at their potency.
The proceedings in the Greek parliament will be followed by a meeting tomorrow week of euro zone finance ministers. A majority for the measures would trigger the release of Greece’s next bailout loan, crucial to avert default next month, and clear the way for negotiation of the second bailout deal, a prerequisite for continued IMF support for the rescue effort.
But that will not be the end of the story, far from it. Leave aside the clear possibility of German jitters or an upsurge in market turmoil and the danger remains that Papandreou’s government will enact laws but fall short on the implementation side.
This has happened before. Does Europe believe Papandreou now when he promises to keep going when the going gets rough? “We trust deeds. We trust figures. We trust facts,” said the spokesman for economics commissioner Olli Rehn. He added the authorities trusted Papandreou, but the point is clear: only delivery will suffice.
There is deep resonance here for Ireland. On the same night in March when Kenny was refused an interest rate cut, the interest rate on Greek rescue loans was cut by one percentage point in return for Papandreou’s promise to execute a €50 billion privatisation plan.
Not a single asset has been sold since, leading to huge pressure on Papandreou to face down tens of thousands of angry workers in state companies.
As EU leaders left Brussels, the riddle of the Greek debt debacle remains unresolved. Kenny may have received gushing praise for Ireland’s austerity effort from his counterparts but there was no rate cut to be had. The saga continues.
