Ramping Up Pressure on Athens: Euro Group Postpones Decision on Greek Aid

Spiegel
June 20, 2011

The euro-zone finance ministers have decided not to approve the next tranche of aid to Athens until the Greek parliament passes new austerity measures. The move increases pressure on the Greek government, but it is unlikely to reassure the financial markets.

It's a reliable rule of thumb with European Union summits that the bigger the problem, the longer the meeting. In this case, the discussion lasted seven hours. It was not until early Monday morning that the finance ministers of the euro-zone countries emerged one by one from the conference center in Luxembourg City's deadly quiet Kirchberg plateau, home to various EU institutions.

The euro group -- as the euro-zone finance ministers are collectively known -- had been discussing how to deal with Greece's debt crisis. But the result they announced came as a surprise: The decision about whether to grant Greece new loans has been postponed.

Observers had been expecting that the ministers would at least approve the next tranche of aid, worth €12 billion ($17 billion), from the current €110 billion package that was agreed on by the EU and International Monetary Fund in May 2010. Greece needs the money by mid-July at the latest to avoid a national default.

But the euro-zone partners want to wait until the last minute before giving the green light. In a statement, the euro group said that the Greek parliament would first have to approve the latest round of austerity measures and a €50 billion privatization program before the next tranche was disbursed.

The motive behind the finance ministers' tactic is obvious: They want to keep up the pressure on the Greek government -- not to mention the recalcitrant opposition. On Tuesday, Prime Minister George Papandreou will face a confidence vote in parliament, which will also vote on the austerity package next week. The euro-zone ministers explicitly appealed to all political parties in Athens to support the austerity measures. "Given the length, magnitude and nature of required reforms in Greece, national unity is a prerequisite for success," the statement read.

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