Due to the inability of Greek party leaders to reach a final agreement on the austerity program, Finance Minister Evangelos Venizelos was forced to leave for Brussels, where he is supposed to meet with Eurogroup officials, with an incomplete draft of the bailout deal.
"I am leaving for Brussels in a short while with the hope that the Eurogroup meeting will be held, and a positive decision on the new program will be taken," he said.
Both the Greek PM Lucas Papademos as well as Evangelos Venizelos confirmed that just one point of the deal awakens controversy, namely pension reductions. The Troika granted Greece on Thursday 15 additional days to find 300 million euros of cuts alternative to pension cuts.
At 17:00 GMT Venizelos will attend a special Eurogroup meeting, called by Jean-Claude Juncker to discuss the Greek situation.
Meanwhile, Greek labor unions have scheduled another 48 hour strike starting Friday to protest against the austerity measures to be agreed upon by the coalition parties. The EUR/USD plunged around 35 pips on the news, from 1.3300 level to 1.3265, where the 20-hour MA lies.
All-night talks in Athens fail to bring complete austerity deal
The Greek govt coalition talks on austerity measures ended past midnight with no deal. Greek political chiefs appear to disagree over pension cuts but seem to have agreed on cutting youth minimum wage by 30+%. Greek Premier crossed the wires saying outstanding issue needs further work.
According to the Greek PM press office: "The Prime Minister and the political leaders met and examined in depth the content of the new economic program accompanying the country’s economic support for the following years. There was broad agreement on all the program issues with the exception of one, which requires further elaboration and discussion with the troika. Agreement should be concluded in view of the Eurogroup meeting. The president of LAOS Mr. George Karatzaferis expressed serious reservations."
In short, after marathon talks late into the night amongst party leaders and the Troika, the situation we have as the sun rises in Europe is still one of suspense, wtih a 'hopeful' Greek FinMin Venizelos about to board a plane to Brussels without still full consensus from Greek political parties on pension cuts, the only sticking point to get a deal done with the Troika.
There has been some last minute reports also coming in at am in Europe suggesting that amid the objections over to pension cuts during the marathon talks, Troika is willing to extend to Greece 15 days to find €300 mln of additional savings.
Troika draft - Greece faces hard cuts
Earlier on, after three days of delays, Greek coalition leaders had agreed on a draft deal on austerity measures demanded by the Troika (Monetary Fund, European Union, and European Central Bank) to secure a €130 billion bailout. According to the first copy obtained by Bloomberg, the draft says Greek economy will shrink as much as 5% in 2012 and sees return to growth in 2013.
In the Troika draft, Greece's government pledges to cut by 20% the minimum wage while it renews its vow to cut 150,000 jobs through 2015 and 15,000 state job cuts in 2012 while pledges 5 fires for every new higher.
Here the highlights of the draft:
- Greece's 2012 GDP will shrink by as much as 5%. The country is expected to return to growth in 2013.
- Greece pledges to cut 15,000 in state jobs in 2012, 150,000 until 2012
- Minimum wage will be cut by 20 percent.
- Pledges not to increase VAT
- The government will cut medicine spending will fall from 1.9% to 1.5%
- Greece will also sell stakes in six companies. In particular, energy companies and refineries.
On Thursday, a series of meetings will make this agreement finally possible, Greece Cabinet is expected to meet in the morning, the Eurogroup is scheduled to gather at 17GMT. Commerzbank analysts observed that the market might not be pricing the fact that even if the Greek deals are pushed through, they still have to pass under parliament vote, which will likely be a tough apple.
As commented by Chris Walker, FX analyst at UBS: "The Greek negotiations appear to be moving into the final stages as Eurogroup chairman Jean-Claude Juncker announced that a press conference is scheduled for 18.00CET on Thursday. The ECB's involvement in the debt swap remains a crucial element in the process."