Greece bailout in limbo, despite advances on austerity

BERLIN, Germany — Athens must have thought it had done enough to get a desperately needed bailout after finally agreeing to yet another tough austerity package. But it seems it wasn’t sufficient after all. By Thursday evening the Greek government was still in limbo, uncertain if its international lenders would extend the lifeline required to evade default.

The Eurogroup of finance ministers from the 17 euro zone countries were less than impressed by the Greek austerity deal, finally approved by the parties backing Prime Minister Lucas Papademos after days of delays.

 “Unfortunately, the Eurogroup did not take a final, positive decision,” Greek Finance Minister Evangelos Venizelos said after Thursday’s talks in Brussels. “Many countries expressed objections, based on the fact that we did not fully complete the list of additional measures required to meet our targets for 2012.”

“The choice we face is one of sacrifice or even greater sacrifice – on a scale that cannot be compared,” he added.

Greece now has until next Wednesday, when the ministers reconvene, to persuade them that it can and will indeed implement the measures.

The so-called troika – the European Union, European Central Bank and International Monetary Fund – are demanding Greece agree to savage cuts before it can release the second 130 billion euro ($172 billion) bailout required to keep Greece afloat. The funds are urgently needed ahead of a 14.5 billion euro debt repayment due on March 20.

Read more: Greeks joke, even God has given up on us.

Yet Greece has already struggled to implement the cuts and reforms that were a condition of the first 110 billion euro bailout in May 2010.

Luxembourg’s Prime Minister Jean-Claude Juncker, who heads the Eurogroup, said Greece had to meet a number of criteria before the bailout can go ahead.

"Despite the important progress achieved over the last days, we did not yet have all necessary elements on the table to take decisions today," he said on Thursday. Europe has outlined three areas where assurances were still required.

The reform package negotiated by the Greek government and the troika has to be given parliamentary approval. Secondly, the political leaders have to pledge that they will implement that package after forthcoming elections in April. And Greece has to come up with another 325 million euros in “structural expenditure” cuts in this year’s budget. “These three elements need to be in place before we can take decisions," Juncker said. "In short, there is no disbursement before implementation."

The euro zone ministers may be justified in having misgivings about the political support for the deal. On Thursday night the Deputy Labor Minister Yannis Koutsoukos, a socialist, stepped down in protest at the severe austerity measures.

In another twist, George Karatzaferis, leader of the rightist LAOS party, the junior coalition partner, said Friday that he would vote against the government proposal expected to come to parliament late Sunday. His party has 16 deputies in parliament. If the two other parties, the socialists and conservatives back it, it should still pass; between them, the control 236 of the 300 parliamentary seats.

However, the parties are fully aware that the cuts are massively unpopular with Greek voters already suffering from five years of recession. Unemployment has reached a record of high of 20.9 percent and industrial output slumped in December by 11.3 percent.

Read more: Greece reaches austerity deal.

On Friday, riot police clashed with demonstrators as thousands gathered in Athens for a rally outside the parliament buildings. Youths hurled petrol bombs and stones at police, who retaliated with stun grenades and tear gas. Thousands also marched in support of a two-day strike called to protest the austerity.

Sign up for our daily newsletter

Sign up for The Top of the World, delivered to your inbox every weekday morning.