You are here

Greece lawmakers meet as default fears loom

Greece's hard-left government was set to meet on Saturday, after sparking fresh fears of a default by demanding temporary funding from its European creditors before renegotiating its foreign loans.

[ATHENS] Greece's hard-left government was set to meet on Saturday, after sparking fresh fears of a default by demanding temporary funding from its European creditors before renegotiating its foreign loans.

The meetings comes after Athens put itself back on a collision course with the European Union by announcing it wanted to talk "without pressure and blackmail", days before an extraordinary meeting of eurozone ministers in Brussels.

Greece's new government and EU leaders held intense discussions this week, in which Athens clashed with Germany over its promises to end austerity and cut Greece's huge mountain of debt.

With the European portion of Greece's 240-billion-euro (S$372 billion) international bailout due to expire at the end of the month, investors are increasingly concerned recession-hit Greece could default on its repayments.

Market voices on:

Credit rating agency Standard & Poor's late Friday downgraded Greece to just one notch above the range indicating vulnerability to a default, warning against further delays to debt talks.

In the "worst-case scenario," it said, Greece could finally exit the eurozone.

Moody's, another ratings agency, said it was placing Greece on review for a downgrade because of "considerable uncertainty regarding the outcome of the ensuing negotiations".

Greece is entitled to another 7.2 billion euros in loans under the huge aid plan first agreed in 2010, money it desperately needs to keep afloat.

But the radical new government says swingeing cuts forced under the terms of the bailout have crippled the economy, and prefers instead to rip up the programme and start again.

Greece is expected to return to growth this year after six years of recession that has left it with sky high unemployment and its economy in tatters.


If Greece will not accept the funds and cannot reach agreement on new terms, its European partners want it to extend the programme - something Athens's new leaders say they will not do.

Instead, they want 1.9 billion euros of profits made by the European Central Bank from holding Greek government bonds, and permission to issue additional short-term debt.

"The bridge programme... is an official expression of the will of all sides to negotiate without pressure and blackmail," a government source said, referring to the temporary funding deal.

"The final Greek proposals... will be tabled after the bridge agreement." Hours earlier the head of the eurozone group of finance ministers, the so-called Eurogroup, had already dismissed the notion of temporary funding demanded by Greece.

"We don't do bridging loans," Jeroen Dijsselbloem told reporters in The Hague, according to Bloomberg.

The Eurogroup is holding a special meeting on Wednesday, the day before EU leaders meet for their regular summit, to discuss the escalating stand-off over Greece.

Top economy Germany, which is opposed to any debt relief or an easing of the austerity measures demanded of the bailout loans, said it expected Athens to set out its plans at the meeting.

"Before then, we expect the Greek government will make a proposal on how things should move forward," German foreign ministry spokesman Martin Jaeger said.

A Greek government source earlier said the meeting was a "welcome" chance to discuss its plans.

Spokesman Gabriel Sakellaridis told Vima Radio that it was in no sense an ultimatum, adding: "The sooner a solution is found, the better for the government and for the EU."

More details on Greece's plans may emerge when the government unveils its legislative programme on Sunday evening.

Greek prime minister Alexis Tsipras and finance minister Yanis Varoufakis visited Paris, London, Rome, Frankfurt, Brussels and Berlin this week to try to win over EU allies.

Italy and France are fighting their own battles with Brussels over how to cut their huge debt piles, while the eurozone is struggling to shake off tepid growth and the threat of deflation.

Italian finance minister Pier Carlo Padoan stressed on Friday that the goal next week was not to set up a confrontation with Greece, but to "look for shared solutions".

"We need to find a solution that puts Greece back on a path to sustainable economic growth and is compatible with its financial commitments," he said, according to Italian news agencies.

Addressing the first meeting of his Syriza party lawmakers in parliament Thursday, Mr Tsipras insisted his government would keep its campaign promises to end austerity.

"We are a sovereign country, we have democracy, we have a contract with our people, we will honour this agreement," he said.

In a remarkable show of support for the government, thousands of people gathered outside parliament Thursday evening, standing silently in Syntagma Square.