A successful fiscal plan for Greece that satisfies international lenders and private investors holding Greek bonds would remove a major risk to the world economy. The country has been edging near a default on its bond payments, which could have fearful consequences for world financial markets.
European officials set a Wednesday deadline for Greece’s Parliament to approve cuts and find $432 million more to trim from this year’s spending. Greece’s main political parties must agree publicly that the promised measures will be implemented. And private creditors will still need to reach a deal to take billions of dollars in losses. Only then would European Union leaders sign off on the overall package. It would be the second bailout for Greece in two years, bringing the total public bill well past $300 billion.
“After a long, tough period of negotiations, we have finally a staff-level agreement,” said Greek Finance Minister Evangelos Venizelos, on his way to an emergency, closed-door meeting in Brussels with European finance ministers and other top officials from Greece’s creditors.
But European officials said a deal was not yet complete.
“The new program provides a comprehensive blueprint for putting the public finances and economy of Greece back on a sustainable footing,” Luxembourg Prime Minister Jean-Claude Juncker, the head of the group of countries that use the euro currency, said at a late-night news conference Thursday after hours of talks. “Despite the important progress achieved over the last days, we did not yet have all the necessary elements on the table.”
German Finance Minister Wolfgang Schaeuble, representing the country that is contributing the most money to the Greek bailouts, put it more bluntly. “Greece has to implement what it has not implemented from the first program before we can decide on a second,” he said.
The IMF and European officials have become frustrated over the inability — or unwillingness — of Greece’s political leaders to follow through on promised economic reforms. In Germany in particular — Europe’s largest, richest economy, and the main contributor to any bailout — politicians appear increasingly willing to contemplate a Greek default, which would reverberate through the international financial system.
In Greece, where unemployment has spiked to 20.9 percent, and is at 48 percent among those under 25, some of the demands from the three-headed team of the International Monetary Fund, the European Union and the European Central Bank seem to Greeks more like a series of mythological challenges than attempts to improve the economy’s standing.