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Greece faces debt default this week, while Eurocrats bicker over aid details

AP Images / Petros Giannakouris
Greek standoff continues
By Stephanie Gruner Buckley
Published Last updated This article is more than 2 years old.

Greek Prime Minister Antonis Samaras and his coalition government managed to pass a 2013 budget through parliament early this morning, only to face the prospect this week of defaulting on a €5 billion ($6.4 billion) debt repayment. The Greek government has announced plans to cover the gap by selling more debt on Tuesday, but the Financial Times reports that the treasury bill auction is likely only to raise €3.5 billion, leaving a shortfall of €1.5 billion (paywall).

The possible debt default is driven by a €5 billion Treasury bill that matures on Friday, Nov. 16. Greek officials may turn to €3 billion in reserve for bank recapitalizations held by the Hellenic Financial Stability Fund. The original idea, though, was to secure by Friday the next tranche of bailout aid, a situation that now seems unlikely.

Greece never seems to catch a break. Greek lawmakers passed the 2013 budget early this morning, and a massive raft of austerity measures last week to unlock further financial aid from the International Monetary Fund (IMF) and the European Union (EU). Parliamentary accord came at considerable cost. The €13.5 billion plan includes wage and pension cuts at a time when new unemployment figures show a quarter of the population is out of work and the country will enter a sixth year of recession in 2013.

Tens of thousands of protestors took to the streets while lawmakers argued inside parliament last week. The mostly peaceful protests were marred by violence when a handful of protestors attempted to break through a barricade to enter the assembly. Police responded by using a water canon and tear gas to disperse them.

Despite the bitter climate, Samaras managed to keep lawmakers focused and delivered a budget and reforms. In return, he is counting on the international community to come through. To rally support prior to this morning’s vote, he said:

Just four days ago we voted through the most drastic reforms ever… Greece has done what it was asked to do and now it is time for the creditors to make good on their commitments.

This seems unlikely, at least this week. Euro-zone finance ministers meet today in Brussels. The assumption was that they would approve Greece’s next aid installment of €31.5 billion. But on Sunday, Germany’s finance minister, Wolfgang Schäuble, said they’re probably not going to make a decision today because the troika report from the IMF, EU, and the European Commission assessing Greek reforms isn’t ready. (Officials are still debating differing debt reduction forecasts). Schäuble said:

We in the Eurogroup and in the IMF want to help Greece but we will not let ourselves be put under pressure.

Meanwhile, discontent in Greece is pushing support to the opposition. A survey on Sunday suggests that the main leftist opposition coalition, Syriza, which opposes the bailout and austerity reforms, is currently the nation’s most popular party (paywall), even though most Greeks don’t believe they could lead.

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