Greece Fights on Two Fronts to Secure New Bailouthttp://www.nytimes.com/2012/02/06/business/global/greece-fights-on-two-fronts-to-secure-new-bailout.html?src=buslnATHENS — Greece’s efforts to secure a second, €130 billion international bailout and avoid a default next month stalled on Sunday.
Prime Minister Lucas D. Papademos met with leaders of the three parties in his coalition government to seek their support for the austerity measures demanded by the country’s creditors, including a reduction in the public payroll and pay cuts for workers in the private sector.
At the same time, Finance Minister Evangelos Venizelos met with representatives of creditor banks to secure agreement on a bond swap that would lower Greece’s debt by €100 billion, or $132 billion.
The so-called troika of the European Union, the European Central Bank and the International Monetary Fund are demanding that the Greek government impose new austerity measures before granting the country a second bailout. On Sunday, Mr. Papademos sought the backing of Antonis Samaras, head of New Democracy, and Giorgos Karatzaferis, leader of the Popular Orthodox Rally, and George A. Papandreou, the former prime minister.
While all three parties are part of Mr. Papademos’s coalition government, they were clearly reluctant to endorse measures on top of those that have already helped send the national economy into recession.
Leaving the prime minister’s residence on Sunday, Mr. Karatzaferis told reporters that he “will not contribute to the explosion of a revolution due to a wretchedness that will then spread across Europe.”
He did not elaborate.
Mr. Samaras also suggested that no agreement was reached on imposing further austerity measures.
“They are asking for more recession than the country can take,” he said, referring to the troika. “I am fighting against this.”
The prime minister’s office released a statement Sunday saying that Mr. Papademos and political leaders “agreed on basic issues including the implementation of measures within 2012 to curb public spending by 1.5 percent of G.D.P., securing the viability of auxiliary pensions, tackling a competitiveness deficit by taking measures which include the reduction of wage costs and nonwage costs — in a bid to boost employment and economic activity — the recapitalization of banks using a combination of methods that secure the promotion of public interest with the banks’ corporate independence.”
“The premier and party leaders are to meet again tomorrow to complete negotiations on the content of the program,” the statement concluded.
Mr. Papademos’s effort to line up support for the new measures have been hampered by turmoil within the parties, including a challenge to the former prime minister, Mr. Papandreou, from within Pasok, the largest party in Parliament.
Mr. Venizelos, the finance minister, met Sunday with Charles H. Dallara, managing director of the Institute of International Finance. Mr. Dallara represents the banks that are being asked to swap their current holdings of Greek debt for new securities, a key component of the proposed bailout.
Those talks have dragged on for months.
Greece must make a €14.5 billion debt payment on March 20 or risk a default that could prove disastrous not only for the country, but for the broader euro zone, and deal a blow to a fragile global economy.
In Germany — the country that has contributed the most to the rescue package — there is widespread skepticism that Greece has the will to make the changes needed to avoid bankruptcy. A majority of Germans — 53 percent — think the euro zone would be better off if Greece reintroduced its own currency, according to a survey conducted by Emnid for the newspaper Bild am Sonntag.
Of those surveyed, 34 percent thought it would be a bad idea for Greece to leave the euro zone. A full 80 percent opposed releasing the next installment of rescue funds unless Greece complies with the program of austerity measures it has agreed to.
Politicians have also become less shy about discussing Greek bankruptcy, once a taboo subject.
Jean-Claude Juncker, the prime minister of Luxembourg and head of the Euro Group of finance ministers, told the German magazine Der Spiegel that Greece would be bankrupt in March if it did not meet the terms for further aid. The threat of bankruptcy “should give Greece some strength when at the moment there are some signs of paralysis,” Mr. Juncker said, according to Der Spiegel.
Mr. Juncker criticized Greece for failing to adhere to the schedule for selling state assets, and said the country’s image suffered because “there are elements of corruption at all levels of administration.”
A euro zone official, speaking on condition of anonymity due to the sensitivity of the issue, said that Mr. Juncker's comments constituted a warning to Greece and reflected the growing sentiment that Greece needed to accept the tough conditions laid down by international lenders if it was to receive a second bailout.
“There comes a point where something has to give — and people are becoming frustrated,” said the official.
Mr. Ackermann suggested last week that the European Central Bank, which owns Greek bonds with an estimated face value of €50 billion, might also need to pitch in.
“Investors have made a big contribution,” Mr. Ackermann said, in response to a question about the E.C.B.’s role. “With so much at stake, all sides should contribute.”
The E.C.B. has refused to take part in debt relief because it does not want to be seen as providing financing to governments, which it regards as a violation of its charter.
There is speculation, however, that the E.C.B. might find a way to contribute profit from its holdings of Greek bonds.
The central bank bought the bonds on the market at a steep discount and could profit from interest payments and repayment of principal.
