Greece: Debt deal needs 'maximum possible speed'

AP News
Posted: Nov 15, 2011 3:02 PM
Greece: Debt deal needs 'maximum possible speed'

Greece's finance minister urged lawmakers Tuesday to ratify a new debt deal with "maximum possible speed" to avoid default and a collapse in living standards to levels seen half a century ago.

Evangelos Venizelos said "sensitive talks" were under way to secure cross-party backing in Greece to the euro130 billion agreement sealed in late October after months of hard bargaining among European nations.

"It is not to be taken for granted that the funds in the Oct. 26 plan will always be available. ... We must move with the maximum possible speed in a totally targeted way" Venizelos said.

"We are taking measures that would have been inconceivable a few months or a few years ago. ... This is a very harsh but necessary way to prevent the real crisis which would be a return to the situation we had in the 1960s or the 1950s."

Venizelos made the comments during a parliamentary debate ahead of a vote of confidence Wednesday in the country's new coalition government.

The new government, headed by technocrat Lucas Papademos, a former vice president of the European Central Bank, was sworn in last week after days of a severe political crisis that brought the country's continued participation in the European joint currency into question.

Rising borrowing costs for troubled eurozone countries hit markets across the continent Tuesday, and sent shares on the Athens Stock Exchange tumbling 3.57 percent to close at 735.65.

Greece sold euro1.3 billion ($1.8 billion) Tuesday in 13-week treasury bills, but will have to pay interest of 4.63 percent.

The new government will face an early gauge of public acceptance on Thursday when unions will join an annual march to mark the anniversary of an anti-dictatorship uprising in Greece in 1973. Fearing violence, some 7,000 police will be deployed in Athens that day.

As prime minister, Papademos has a delicate balancing act with his government, including ministers from the country's two main _ and usually ferociously opposed _ parties, the socialists and conservatives. Cabinet posts were also handed to a small right-wing populist party.

Papademos will meet Monday with top EU executive officials Jose Manuel Barroso and Herman Van Rompuy, while Venizelos spoke on the telephone Monday to EU Monetary Affairs Commissioner Olli Rehn and Charles Dallara, who heads a a global banking lobby group negotiating Greece's debt reduction.

The new debt deal includes provisions for private bondholders to give up 50 percent, or some euro100 billion, of their Greek debt holdings. The details of what is known as the private sector involvement, or PSI, still needs to be worked out.

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Greece has been gripped by a vicious financial crisis for the past two years. In return for an initial euro110 billion bailout agreed on in May 2010, the country imposed harsh spending cuts, including slashing pensions and salaries and increasing taxes.

Papademos was sworn in last week, replacing the Socialist Prime Minister George Papandreou who stepped down days after making a disastrous proposal to put the new debt agreement to a referendum.

Europeans responded to that plan by freezing an euro8 billion bailout loan installment and demanding written backing from the socialists and conservatives for the country's commitments to rescue creditors before the payout is made.

So far, conservative leader Antonis Samaras has refused to sign that commitment, despite official warnings that Greece will default in mid-December without the funds.

"Everybody, of course, wants to get the (bond) `haircut,' and everyone wants to get more money out of Europe," financial analyst Vangelis Agapitos told AP television. "But when it comes to delivering on promises and painful measures, the consensus may be there in words but in deeds we will have to wait and see."


AP writer Nicholas Paphitis and AP television producer Theodora Tongas in Athens contributed.