Papademos gets Greek Cabinet approval on bailout plan

source:FXSTREET.COM

Lucas Papademos, Greece Prime Minister, has gotten the Cabinet okay on the second rescue package and to submit the new regulation for new budget measures on the back of the Troika demands according to Bloomberg report on Greek Official.

After a week that has been dominated by news from Greece, where the politicians held interminable talks on a new package of austerity measures required by the Troika in exchange for releasing the second bailout. Even though the party leaders finally managed to reach consensus, just before a special Eurogroup meeting called on Thursday to deal with the situation, EU officials approached the approved plan with reserve.

Disbelief over the effectiveness of the new Greek austerity plan kept the Eurogroup reluctant to sign off on a fresh second bailout worth 130 billion euros. Despite the most painful austerity measures Greeks will witness on their life-time, Eurozone ministers have cast doubt over the plans. They demanded additional savings of 325 million euros, a ratification of the austerity plan by the Greek parliament and a written commitment that they will be implemented no matter what the result of the April elections is.

German FinMin Schaeuble stated plainly “Greece must first implement parts of the first program before we decide upon a second bailout. We still don’t have the conditions required by the EU council. I’m confident the timetable can be met. It’s all down to Greece, (but) these are not simple decisions. I don’t think we’ll come to any results tonight. The negotiations have made progress but we’re not there yet.”

The Greek government will hold a meeting at 16:00 GMT to discuss Troika’s requirements. The parliamentary vote is supposed to take place on Sunday or on Monday.

Meanwhile, Greek labor unions have scheduled for Friday another, second this week 48 hour strike to protest against the painful austerity measures. Thousands of Greek citizens took to the streets to participate in demonstrations, which in some cases turned into riots. The country’s largest police union, reluctant to “fight against brothers,” made a symbolic announcement that they will issue warrants for EU and IMF officials, accusing them of “…blackmail, covertly abolishing or eroding democracy and national sovereignty,” according to Reuter’s sources.

As far as the PSI negotiations are concerned, they have to be concluded by February 13 if the March 20 bond payment is to be made, but that is contingent on the Troika signing off the aid package.

EU exasperated by lengthy Greek austerity negotiations 

During the course of the week Eurozone leaders were constantly expressing their exasperation with Athens’ inability to strike a deal quickly even though, as Angela Merkel said, “Time is of the essence. A lot is at stake for the entire euro zone.”

On Wednesday night, after three days of delays, Greek coalition leaders prepared a a draft deal on austerity measures demanded by the Troika. Greece’s government pledged to cut by 20% the minimum wage, reduce 15,000 state jobs in 2012 and 150,000 until 2012 and decrease medicine spending from 1.9% to 1.5%. The only point still causing controversy, namely pension cuts, was sorted out the next day, closing thus the negotiations.

Meanwhile, the ECB seemed to have been gradually relaxing its stance on what contribution it could make in the Greece restructuring sovereign debt program. According to Wall Street Journal sources: “The ECB is now willing to exchange Greek bonds with the EFSF, but will not take any losses on the exchange.” Still, no decisions are to be made before Greece finalizes the PSI deal and Mario Draghi refused to comment on the matter during the press conference following ECB’s interest rate decision on Thursday.

Kathy Lien, Director of Currency Research for GFT comments: “If everything goes smoothly, Greece will receive bailout funds just in time to avoid default. Before getting too excited however, its important to remember that there are still a few hurdles to clear before the funds can be released. The Greek and German Parliaments have to vote on the full package – but we expect the votes go smoothly because it would be a major embarrassment and setback for everyone if the plan was rejected.”

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