EU, ECB and IMF introduced 'unreasonable' 11th-hour demands that were not part of deal Athens signed up for, claim officials
Helena Smith in Athens
The Guardian, Tuesday 16 October 2012 21.14 BST
Greece's relations with its international creditors were close to rock bottom on Tuesday when talks aimed at unlocking €31.5bn (£25.5bn) of aid for the debt-choked country were suspended amid unprecedented acrimony – despite late night efforts by both sides to dampen speculation that the negotiations had been derailed.
The breakdown, ahead of Thursday's EU summit, followed the refusal by prime minister Antonis Samaras' fragile coalition to endorse further labour reforms and wage cuts – moves that officials believe would be the tipping point for a society brought to the brink by more than two years of belt-tightening.
Tensions were heightened by the overriding sense that the EU and International Monetary Fund – which with the European Central Bank form the troika keeping the country afloat – were putting "unreasonable" demands on the table "at the eleventh hour".
Officials claimed the conditions were not part of the deal when Athens signed up to its second €130bn bailout agreement in March. Many rejected the latest demands, which include drastically reducing severance pay, as tantamount to introducing labour conditions not unlike "those of the middle ages".
The IMF mission chief to Greece, Poul Thomsen, tried to play down the spat saying "we agreed on most policy issues" after talks with finance minister Yiannis Stournaras. The Oxford-trained Stournaras said "open issues" remained but the government would make counter-proposals in the coming days.
Samaras' junior coalition partners, however, appeared in no mood for compromise. "The troika demands feed galloping recession," said Fotis Kouvelis, leader of the small Democratic Left party as he left talks earlier on Tuesday night with Samaras and his other coalition partner Evangelos Venizelos. "They exceed the endurance of Greek society."
With public coffers set to run dry next month, the government needs agreement over the €13.5bn package of budget cuts and long-overdue structural reforms, otherwise Greece stands to lose a €31.5bn tranche of aid.
But with the country also mired in unprecedented recession, officials are digging in their heels over the need not to push the austerity-weary nation too far.
"We must conclude the measures but not haphazardly and not at any cost," Venizelos, the socialist Pasok party leader, told reporters after the discussions.
The former finance minister accused the troika "of playing with fire and endangering Greece and the EU".Instead of wishing to conclude the marathon negotiations lenders appeared bent on deliberately stalling the talks, he said.
"I asked the prime minister to make very clear the economic and social conditions of Greece at [Thursday's] summit to explain why these demands cannot be met."
It will now be left to Samaras to explain the latest setback when he attends the EU summit, his first since assuming power in June. The conservative leader, who faces mounting opposition from unions and Greece's increasingly vociferous "anti-bailout" front, had wanted to have the negotiations wrapped up when he flew to Brussels.
"You have to ask why they are doing this. Do they want to push Greece into a corner, do they want the government to fall, do they want to see the country default on its debt?" asked commentator Yiannis Pretenderis on Mega TV's news programme. "It makes no sense at all. These questions have to be asked both in and outside Greece."
In a clear bid to win goodwill ahead of the summit, the government announced on Tuesday that it planned to lease a string of state assets including the country's biggest oil refiner and two largest ports as part of efforts to pay down debt and meet the conditions of its international bailout.
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