Greek cabinet tackles austerity, rescue hopes rise
Greece's cabinet tackled on Saturday how to implement austerity demanded by the EU and IMF as a 130-billion-euro ($171-billion) rescue seemed within reach, while the euro zone considered modifying a deal with private creditors to help Athens reduce its huge debts.
After months of often acrimonious negotiations, Greek hopes were rising that euro zone finance ministers Monday will endorse the rescue which Athens needs to avoid bankruptcy next month when major debt repayments fall due.
A statement from the office of Prime Minister Lucas Papademos said the cabinet would discuss implementing the bailout package which demands pay, pension and job cuts on top measures that have already hit many Greeks' living standards.
The cabinet is due to approve measures that already provoked rioting on the streets of Athens last Sunday before they go into a supplementary budget due to be put to parliament next week.
"The Greek people have done everything they can and we are determined to make good on our commitments," Public Order Minister Christos Papoutsis told reporters as he arrived. Many EU officials remain deeply skeptical of Athens's will to reform.
Also on the agenda is the future of the old Athens airport, a prime seafront site that lies derelict more than a decade after the new airport opened, symbolizing the wasted opportunities which have helped to reduce Greece to its knees.
Friday German Chancellor Angela Merkel, Italian Prime Minister Mario Monti and Papademos all voiced optimism about a Greek accord during a three-way conference call, Monti's office said in a statement.
However, Jean-Claude Juncker, who will chair Monday's meeting of the Eurogroup in Brussels, made clear that urgent work was still needed to get a program to reduce Greece's crippling debts back on track.
Missing the Target
At stake is a target of lowering the debt from the equivalent of 160 percent of annual Greek economic output now to a more manageable 120 percent by 2020.
"All the discussions I will have ... until Sunday night will try to move the figure nearer to the target," Juncker told reporters.
At the moment, EU and IMF officials believe that target - which assumes that Greece will run a budget surplus next year, excluding the massive cost of its debts - will be missed.
Under the main scenario of an analysis by the European Commission, the European Central Bank and the International Monetary Fund, Greek debt will fall to only 129 percent of gross domestic product in 2020, one official said.
The euro zone is therefore looking at modifying a deal negotiated over many months with private creditors under which they would accept a cut of around 70 percent in the real value of their Greek bondholdings.
Senior euro zone finance officials meet Sunday to discuss the analysis and find ways to bring the debt closer to the 120 percent target before the finance ministers gather Monday.
"If you do a number of things you can bring the 129 close to 120," one euro zone official familiar with the document said.
These might include changes to interest accrued on privately held bonds, but the EU and its national institutions might also play their part, the official said.
Interest rates on EU loans to Greece could be cut, and those national central banks in the euro zone which hold Greek bonds might accept similar terms to the private creditors on some of their holdings.
The national central banks own an estimated 12 billion euros of Greek debt. The European Central Bank has refused to take part in the complex deal for the private creditors - involving swapping old bonds for new ones with a lower face value, lower interest rates and longer maturities - and would need to approve the national central bank decision.
Officials also are considering a cut in the cash "sweetener" which would be offered to the private creditors in return for accepting the cut in the value of their bond holdings
With Greek morale at rock bottom, the national mood darkened yet further after armed thieves looted a museum Friday in Olympia, birthplace of the Olympic Games. They stole bronze and pottery artifacts weeks after the National Gallery was burgled.
A Greek newspaper suggested the state could no longer look after the nation's immense cultural heritage properly. "The Greek state has gone bankrupt, let's face it," the daily Kathimerini said.
"If the state cannot guard the country's great cultural heritage for financial or other reasons it must find other ways to do it," the conservative daily said.
"It could, for example, turn to large foundations and ask them to assume the cost of security at the country's important museums in the next two to three difficult years."
Critics say years have been wasted arguing and dithering over major national decisions. This is symbolized by the old Athens airport, which is supposed to be rebuilt as a Monte Carlo-style development of housing, tourist facilities and a marina, but remains a wasteland.
Athens opened a new airport in 2001, well in time for the 2004 Olympic games, but longstanding plans to privatize it have also yet to materialize.
[Source: By David Stamp and George Georgiopoulos, Reuters, Athens, 18Feb12]
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