Bailout for Greece to grow?

The size of the next bailout for Greece appears to be in doubt after International Monetary Fund Managing Director Christine Lagarde was reported as telling German Chancellor Angela Merkel that loans for Athens would have to be increased by “tens of millions of euros.” Germany’s Handelsblatt business daily quoted an unnamed German government source as saying that Lagarde had suggested that Greece would have to be given more than 130 billion euros in loans as part of its next bailout package. The issue has been raised by a number of commentators who believe that the haircut of about 50 percent that Greece is currently negotiating with its bondholders will not be enough to make Greek debt sustainable.

Officials from the European Central Bank, the European Commission and the IMF are due in Athens next week to assess Greece’s fiscal adjustment. The so-called troika will have to advise the EU and the IMF before anymore funding can be released. Should this be more than 130 billion euros, the pressure on Greece to meet its targets will be even greater. One of the issues that the troika team is likely to raise is wage costs. The government is under pressure to broker a deal between labor unions and employers that would see the minimum wage of 751 euros gross reduced and the 13th and 14th monthly salaries reduced and incorporated into the other 12 payments.

Employers and unionists, who are due to meet for talks this week, have balked at these demands and have suggested reductions in social security contributions as a possible alternative. Yiannis Panagopoulos, the head of Greece’s private sector umbrella union, warned the government Wednesday not to attempt to bypass negotiations by drawing up a law scrapping the national collective contract, which is due to expire in June this year. He said this would be an “extreme act.” Politicians were left embarrassed Wednesday by figures which showed that parties were receiving greater funding at a time when voters are being asked for greater sacrifices.

According to figures released by the Interior Ministry in response to a question from Democratic Alliance MP Lefteris Avgenakis, state funding for political parties increased by 5.2 million euros last year. The parties received 54 million euros last year compared to 48.8 million in 2010.


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