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Sarkozy And Merkel Apply Pressure To Clinch Greek Deal

Angela Merkel and Nicolas Sarkozy applied pressure on Greece to reach a final agreement with her creditors.
By Amiel Ungar
First Publish: 2/7/2012, 4:44 AM

As final details of the Greek bailout package are still not in place and another deadline has passed in terms of reaching an agreement between Athens and the international creditors, the Greek government and the entire Greek political class is coming under pressure.

The European leaders want the problem resolved once and for all. They have witnessed a stabilization of the Italian situation, but the continued bleeding and uncertainty from Greece threatens to undo this progress.

The two senior partners in the European Union - Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France - met in Paris and decided to lower the boom on the Greek government. Both leaders used the term "time is running out."

Mr. Sarkozy added:

“Our Greek friends must take responsibility and vote for the reforms to which they are committed. This concerns everybody – the prime minister, the leader of the socialist party and the leader of the (centre-right) New Democracy party.”

Sarkozy was addressing the three major players in the Greek drama: Lucas Papademos, the technocrat Prime Minister and his predecessor George Papandreou, still the leader of the PASOK Socialist party and Antonis Samaris, leader of the opposition New Democracy Party that is leading in the polls.

Europe wants government and opposition to commit to a policy that would cut the minimum wage of €750 a month by 20%, implement layoffs in the public sector, and reduce pensions and other labor expenses in order to improve the country's competitiveness.

Additionally the international creditors have asked for job cuts in the public sector including the police, Armed Forces and teachers on temporary contracts. 150,000 civil service jobs are to be eliminated by 2015

The political leaders, for their part ,are coming under pressure. Two Greek unions have called a 24 hour general strike to protest the measures. Due to the contraction of the Greek economy, the ratio of debt to the GDP has actually risen. The creditors want Samaras to sign on the deal to make sure that he will not renounce it or seek to renegotiate it should he come to power. The New Democracy leader has voiced doubts about the package, claiming that the creditors were "asking for more recession" from Greece.

The French president, playing the good cop, asked the Greeks to make the final push since an agreement was so close. Merkel ,playing the bad cop, told the Greeks that there was no wiggle room "there can be no new Greek program".

Greece needs €130 billion to avoid default next month and Merkel was telling the Greek leaders point blank, no deal, no money. Maria Damanaki, the Greek member of the European commission, added to the pressure by telling a Greek newspaper that the European Union was in the process of formulating concrete plans in the event that Greece defaults and has to leave the euro. In other words, the Greeks cannot bank on an improvement in terms, because Europe is too scared of a default and the resulting contagion.