'World economy at stake' in Greek austerity vote - the Mesh Report

‘World economy at stake’ in Greek austerity vote

the Mesh Report Staff June 28, 2011 0

Europe ramped up pressure on the Greek parliament Tuesday to approve drastic austerity measures, warning that it would otherwise face a swift debt default that would rock the world economy.

As Greek police clashed with protesters ahead of this week’s vote, Brussels told Greece that no “Plan B” would be waiting if it failed to pass the measures demanded by creditors in return for loans needed to keep Athens afloat.

“There are decisive moments and the coming hours will be decisive, crucial for the Greek people, but also for the eurozone and the stability of the world economy,” EU president Herman Van Rompuytold the European parliament.

Prodding Greek politicians to “take their responsibilities,” Van Rompuy said “the more unanimity there is, the more unity there is, the better for the people of Greece and our future.”

European Union economic affairs commissioner Olli Rehn said Greece was facing a “critical juncture,” and that “both the future of the country and financial stability in Europe are at stake.

“I trust that the Greek political leaders are fully aware of the responsibility that lies on their shoulders to avoid default,” he said.

“The only way to avoid immediate default is for Parliament to endorse the revised economic programme.”

Rehn slapped down speculation that Europe was working on a contingency plan in case Greek lawmakers reject 28.4 billion euros ($41 billion) in budget cuts and tax rises as well as a 50-billion-euro privatisation programme.

“To those who speculate about other options, let me say this clearly — there is no Plan B to avoid default,” he said.

A high-ranking European official, speaking on condition of anonymity, has said that a Plan B was in the works, stressing that “the next step is not a default of Greece.”

German Finance Minister Wolfgang Schaeuble said in a newspaper interview published on Sunday that the eurozone must be “prepared for the worst” and would cope even if Athens defaulted on its debt.

EU officials reiterated that the austerity measures were a pre-condition for the EU and International Monetary Fund to release 12 billion euros from last year’s 110-billion-euro bailout, which Athens needs by July to avoid collapse.

“They must be approved if the next tranche of financial assistance is to be released,” Rehn said.

“The European Union continues to be ready to support Greece but Europe can only help Greece if Greece helps itself,” he said.

Eurozone finance ministers hold a special meeting on Sunday when, depending on the Athens vote, they will decide to unblock the loans and devise a second bailout, which could also amount to 110 billion euros.

Tensions mounted in the streets of Athens meanwhile as a general strike turned ugly, with anti-riot police firing tear gas at 10,000 protesters outside parliament after youths hurled firebombs ahead of the key votes on Wednesday and Thursday.

Socialist Prime Minister George Papandreou, who has a five-seat majority in parliament, pleaded on Monday with lawmakers to back the measures but the conservative opposition has criticised the plan.

European competition commissioner Joaquin Almunia joined the chorus of concern, saying in a speech in London that Europe was “going through a period of acute crisis.

“The fiscal crisis in Greece is threatening to destabilise other euro area economies and even the proper functioning of the European monetary union, with serious implications for the growth outlook in large parts of Europe and beyond,” he said.

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