martes, 21 de junio de 2011

Greece: Government to face vote of confidence

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money. 
The Greek government is due to face a vote of confidence, a crucial first step towards gaining a vital 12bn euro ($17bn; £10bn) loan.
If the government survives the vote, Greece's parliament will be asked to back the latest spending cuts - worth 28bn euro - on 28 June.
These austerity measures and other reforms have to be introduced before the European Union and International Monetary Fund release the funds.
Greece needs the loan to pay its debts.
Mass demonstrations Tuesday's vote of confidence is on the new Greek cabinet, which Prime Minister George Papandreou put in place last Friday.
Mr Papandreou hopes the new cabinet, and specifically the new Finance Minister, Evangelos Venizelos, will help secure parliament's backing for further austerity measures that are already proving deeply unpopular with the Greek people.
At the weekend eurozone finance ministers decided to postpone their decision on whether to grant Greece the 12bn euro loan until the country introduces the additional spending cuts and privatisation programmes.
The Greek government and the EU are involved in a game of "dare"... The first part of this drama will be played out today” 
Greece needs this aid - the latest tranche of the EU and IMF's 110bn-euro aid package - by July to be able to keep up with payments to the creditors of its huge debts, which amount to 30,000 euros per person.
If the Greek parliament does back the austerity measures, the eurozone finance ministers will meet again on 3 July, with the funds expected to be released by the middle of next month.
However, lawmakers are having to ponder their decision in the face of mass demonstrations, strikes, and even riots.
The latest protest against the cutbacks involves workers at Greece's state-owned electricity company, who are on a 48-hour walkout.
BBC Europe editor Gavin Hewitt, who is in Athens, says ministers have argued that without further austerity measures in exchange for a new bail-out Greece is heading for bankruptcy, but many Greeks appear to prefer that option to further austerity.
Graphic showing the compostition of the Greek parliament
Mr Venizelos said the decision of the eurozone finance ministers to delay the loan showed that urgent action was now needed. "We have plenty to do," he said.
Some believe Greece should simply give up trying to pay its colossal debt, which is worth 150% of its annual GDP output. That would mean it having to leave the 17-member euro group of nations.
The Conservative MEP, Daniel Hannan, said the bailout would not help the people of Greece: "This is not assistance for Greece, it's not how anyone there sees it. They understand perfectly well what the bail-out means, which is that the money will go to European bankers and bond holders, but the repayment will come from Greek taxpayers. So far from being helped, Greece is being sacrificed to save the euro."
Olli Rehn, the European Union's Monetary Affairs Commissioner, urged Greece to continue with its austerity measures.
"The greatest weight of responsibility lies on the shoulders of the new Greek government," he said.
Mr Rehn added that the situation in Greece was the worst crisis Europe had faced "since the Second World War".
New aid
A new aid package for Greece about the same size as the first, which was passed in May last year, was also agreed in principle by EU finance ministers on Sunday. Greece: Crucial dates
  • June 28: Greek parliament to vote on a new austerity package
  • July 3: Eurozone deadline: will sign off latest bail-out payment to Greece - 12bn euros - if austerity package has passed
  • July 15: Default deadline: Without the 12bn euros it needs to make debt repayments, Greece will default 
The new package, to be outlined by July, will include loans from other eurozone countries.
It is also expected to feature a voluntary contribution from private investors, who will be invited to buy up new Greek bonds as old ones mature.
Officials said this money had to be freely given, or it would be seen as technical default on Greece's debt repayments.
If Greece were to default - or seen to be in default - it would mean massive losses for European banks that hold Greek debt, including the European Central Bank.
Officials said the new plan was expected to fund Greece into late 2014 and total about 120bn euros.
Inspectors for the EU and IMF are making another visit to Athens on Tuesday in what the European Commission said would be a "technical mission".
The visit, which comes after teams from both bodies have spent months poring through the country's accounts, is unscheduled and the Commission did not say what its objective would be.
Countries most expose to Greek debt