Options open ahead of summit
Prime Minister George Papandreou received a boost on Friday ahead of his attendance at the European Union leaders? summit in Brussels Sunday as eurozone finance ministers gave the green light for Greece to receive its next tranche of loan funding.
But the premier was still dogged by concerns about a haircut for holders of Greek debt and the growing political pressure he is facing at home.
The Eurogroup agreed that Greece should receive the 8-billion-euro installment once the International Monetary Fund has also given its approval.
The news will have come as a relief for Papandreou as he prepared for a series of meetings in Brussels, coming as it did just 24 hours after his government passed a new set of austerity measures that were demanded by the EU and the IMF.
However, ahead of Sunday?s summit there was still a lot of uncertainty about other aspects to the package the eurozone is trying to put together to deal with Greece?s large debt. Germany and France appear to be at odds over how to scale up the European Financial Stability Facility (EFSF), the eurozone?s crisis fund, and what size haircut Greek bondholders should be asked to take.
Although a 21 percent writedown had been agreed in July, it is likely that this will be increased. Figures of between 30 and 50 percent have been reported. With regards to the EFSF, it is likely that the fund will be used to guarantee a portion of potential losses on new eurozone bonds but a number of other options remain on the table. It is unlikely that a decision will be reached this week and a eurozone leaders? summit has already been arranged for Wednesday.
In a message on Twitter on Friday, Papandreou said there were ?serious doubts? about a deal being reached tomorrow. ?It is our strategic priority to remain in the eurozone,? Papandreou said. The second goal, the premier said, is the implementation of decisions made on July 21, when EU leaders hammered out a second bailout package for Greece.
At home, Papandreou remains under pressure from some PASOK MPs to find a way of getting other parties to share the burden of carrying out structural reforms and enforcing unpopular measures. The Socialists are concerned that their party is suffering irreparable damage in terms of its public support because it is shouldering a disproportionate amount of responsibility for Greece?s effort to get out of the debt crisis. Among the suggestions made by lawmakers are for Papandreou to find a way to bring other parties into a coalition government.
However, a group of 28 PASOK deputies issued a statement supporting Papandreou in which they called for him to form a ?national plan to exit the crisis? when he has completed talks with European leaders.
The move reflects the growing divergence in views within PASOK about how the government should move forward.
