Tuesday, May 24, 2011

Greece crisis worsens amid political stalemate

A damaging political stalemate is threatening to plunge Greece deeper into crisis as hopes of cross-party support for further austerity measures were dashed on Tuesday by the main opposition leader.

Antonis Samaras, head of New Democracy, the conservative party that earlier this month called for a renegotiation of the original €110bn (£95bn) bail-out, said he would not support additional austerity measures, totalling €6bn, to reduce the country's budget deficit.

His refusal to back the government could jeopardise both payment of the rescue package's next instalment, of €12bn due in June, as well as ongoing talks over a second bail-out, of as much as €60bn.

The political wrangling came as Vince Cable, the Business Secretary, became the first UK politician to admit openly that Greece has no option but to restructure its €330bn of public debt.

"What they are going to have to do is to have a rescheduling of their debt and it can be done in a soft way or a hard way, and that's what the current debate is about," he said in a newspaper interview. "I think in practice what will happen, people are already discussing this, is a negotiated rescheduling.

"You can't just deal with this by cutting, cutting, cutting – it does not work." (read more)