Brussels • Hours after Greece made the unpopular decision to slash government spending in an attempt to ease its debt crisis, Germany’s finance minister questioned Thursday whether the deal goes far enough to earn a crucial $172 billion bailout.
Greece’s new austerity plan would make deep cuts to wages and public sector jobs and it ignited new criticism from unions and the country’s deputy labor minister, who resigned in protest.
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But finance ministers from the other 16 countries that use the euro at a meeting in Brussels indicated that even those painful steps may not be enough to get Greece’s economy back on track.
Greece is under immense pressure to reach a rescue deal. On March 20, it has to repay billions in bonds — money it doesn’t have. The country’s total debt is equivalent to 160 percent of its economic output, and unsustainable for a country in its fifth year of recession.
Greek Prime Minister Lucas Papademos earlier Thursday said that all major party leaders in the country’s coalition government had given their backing to a new round of painful spending cuts he had worked out with the European Union, the European Central Bank and the International Monetary Fund and that the talks "were successfully concluded."
The cross-party support was a key demand from Greece’s international creditors, which had remained elusive during marathon talks over the past weeks.
The focus has now shifted from Greece to its European neighbors who must give their blessing to the austerity plan — as well as a separate debt-relief deal with banks and other private creditors — before the bailout funds are released.
Finance ministers meeting in Brussels were nervous Greek politicians will not stick to its austerity targets after elections expected in April and that there may still be a gap in the country’s finances.
Germany’s Finance Minister Wolfgang Schaeuble warned that the new round of spending cuts appears to not yet fulfill all the conditions for a bailout, which Athens needs to secure to stave off bankruptcy.
As the largest economy in Europe, Germany is a leading force in the group of 17 countries that use the euro — the so-called eurozone — wielding its considerable economic clout to steer decision-making and policy.
"The agreement, as far as I understand, is not at a stage where it can be signed off," Schaeuble said as he arrived at a meeting with his eurozone counterparts. "It’s a stance in the negotiations that was agreed on but no one expects that this negotiation stance can get support."
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