Greek PM presses for deal on loan

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Associated Press

Posted on November 21, 2012 at 6:33 AM

ATHENS, Greece (AP) — Greece reacted with dismay Wednesday after European finance ministers failed to agree to release vital rescue loans, with the prime minister warning that the stakes are higher than just his debt-ridden country's future.

After 12 hours of debate, finance ministers from the 17 European Union countries that use the euro, together with the International Monetary Fund and European Central Bank, had no deal on Greece's financing. The impasse follows another fruitless meeting last week and highlights the depth of divisions over how to handle the country's huge debt problem without reaching deeper into the pockets of their own taxpayers.

"Greece has done what it had to and what it had committed to doing," Prime Minister Antonis Samaras said. "Our partners, along with the IMF, also must do what they have undertaken."

The ministers are to convene again next Monday.

But Greece is already living on borrowed time. Faced with €5 billion ($6.4 billion) in maturing treasury bills that it couldn't pay last week, Athens issued more short-term debt to cover the gap and tide it over until it can receive its bailout funds. But most of that was in the form of four-week treasury bills, meaning the country will face the same situation next month — when it has more than €7 billion ($9 billion) in redemptions — unless the loans come through.

"It is not just the future of our country, but the stability of the entire eurozone that depends on the successful completion of this effort in the coming days," Samaras said.

"Whatever technical difficulties (there might be) in finding a technical solution, do not excuse any ... delay," he said.

Greece's fortunes are inextricably tied to the rest of the eurozone. Without the bailout funds that have been keeping it afloat since May 2010, the country would default and could end up having to leave the eurozone. This could have a knock-on effect on other financially troubled eurozone nations, with investors pulling their money out of those countries too, or demanding higher returns to keep it there.

German Chancellor Angela Merkel, whose country is the single largest contributor to Greece's bailout, indicated that a solution was not assured even on Monday.

"I think there are chances — one does not know, but there are chances — of having a solution on Monday," she told lawmakers in Berlin during a speech to Parliament on her country's budget.

Greece has been relying on rescue loans from other eurozone countries and the IMF since May 2010, after a massive budget gap and spiraling national debt left investors too wary of buying its bonds on the international market.

In return, the country has had to submit its economy to scrutiny from the so- called troika of the IMF, ECB and European Commission. It has also had to impose several rounds of austerity measures, included repeated salary and pension cuts and increased taxes.

The belt-tightening has left Greece mired in a deep recession expected to head into a sixth year. One in four Greek workers are now unemployed, and tens of thousands of small businesses have shut down. The country's uneasy three-party coalition government recently passed another round of spending cuts through Parliament, a requirement for it to be given the long-delayed next installment of its rescue loans, a €31.5 billion ($40 billion) batch.

The government also hoped to see outstanding funds from previous loan installments, and a batch originally earmarked for December, bringing the total expected to €44.6 billion.

But there has been disagreement among the eurozone's ministers and the IMF on how to make Athens' debt manageable. The eurozone ministers are in favor of giving Greece an extra two years, to 2022, to bring its debt down to 120 percent of gross domestic product from the 176 percent forecast for this year. The IMF has resisted such an extension.

"Europe finds itself before the dead end that its political choices have created," said Alexis Tsipras, head of the main opposition Radical Left, or Syriza, party. "Day by day it is confirmed that the path of (the bailouts) is catastrophic for the European structure and painful for the people of Europe."

Merkel insisted on Greece fulfilling its obligations.

"Of course it is a political decision to say that we want Greece to remain in the euro area, but that does not free us from the ensuring that the reforms in Greece are really carried through, for the good of people in Greece," she said.

"It is good news that the troika has now said that the conditions for changing the country have been fulfilled in Greece, and I know how much effort that cost the Greek government," she said. "And so there will be no reduction of the expectations, of the reforms."

Greek stocks fell, with the general share index down 0.3 percent in midday trading — recovering from an opening fall of more than 3 percent.

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Geir Moulson contributed from Berlin.

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