May 29, 2011
The outlines of a further Greek rescue package are starting to emerge in Brussels and Athens but agreement remains fraught with political difficulties.
A fundamental problem is disagreement over the need for the involvement of private creditors in any form of debt rescheduling. The German government in Berlin and the European Central Bank in Frankfurt are at loggerheads on the issue.
The Greek government faces a popular backlash against any more austerity measures and is struggling to win political agreement on a privatisation programme demanded by its creditors. Pressure is building on Antonis Samaras, the leader of the conservative New Democracy party, who supports the privatisation programme but opposes tax increases and wants tax relief instead to help the economy rebound.
Among northern members of the eurozone, including strict budget disciplinarians such as Germany, Finland and the Netherlands, there is growing doubt that parliaments will agree to any further rescue measures without private sector involvement and more measures to make Greek debts sustainable in the long run.