Eurozone Demands Greek Austerity Vote

(Wall Street Journal) - Greece's political leaders agreed Thursday on unpopular budget, wage and pension cuts that moved Europe to the verge of approving a new bailout to stave off a messy Greek debt default -- but eurozone finance ministers demanded the measures pass the Greek Parliament before they would finally sign off on the deal.

The demands from the finance ministers, meeting in Brussels late in the day, set the stage for further uncertainty over the long-awaited bailout and debt-restructuring package for Greece.

The focus on Sunday will shift to the Greek Parliament, where the eurozone is insisting the program be agreed upon. "In short, no disbursement [of aid] without implementation," said Jean-Claude Juncker, the Luxembourg prime minister who serves as chairman of the ministers' meeting.

The ministers coupled their demand for parliamentary action with an insistence that the political leaders of Greece's coalition sign a written pledge to back the program -- in an effort to bind political leaders after elections expected as soon as April -- and to identify exactly from where €325 million ($US431 million) out of more than €3 billion ($US4 billion) in promised budget cuts this year will come. Juncker confidently predicted, "The Greek Parliament will not reject the program."

Evangelos Venizelos, the Greek finance minister, put the choice facing Greece in stark terms: "If we see our future and the salvation of the country in the eurozone, in Europe, we must do what we must do in order for the program to definitely be approved ... If our country, our people prefer another political decision that necessarily leads out of the eurozone and therefore outside European integration, we have to say this clearly to ourselves and to our compatriots."

The demands underline the erosion of trust between Greece and its creditors in the eurozone. A further meeting of eurozone ministers is scheduled for next Wednesday to finally sign off on the agreement, assuming the package passes parliament.

After all-night talks, Greek Prime Minister Lucas Papademos announced a deal early Thursday among the main political parties to cut spending, slash the minimum wage by 22 percent and cut pension benefits. These measures are the price of a package of new loans and a debt restructuring.

Thursday's political deal in Athens followed protracted overnight negotiations among Greece's main political leaders -- from the Socialist, or Pasok, party, the conservative New Democracy party and the small nationalist Laos party -- over what measures they were prepared to accept to clinch the bailout deal.

The plan would pave the way for a bond swap between the government and its private-sector creditors that needs to be put in motion soon. A €14.5 billion ($US19.3 billion) bond repayment looms March 20; without the bailout in hand, Greece will default on its debt, with potentially catastrophic effects on eurozone government-bond markets.

Olli Rehn, the European Union economics commissioner, said the debt-restructuring accord was "practically finalized." He admitted that time for completing the debt swap is running short "but we are still within the schedule."

Read more: Wall Street Journal