Eurozone turns screw on Greece

A scheduled summit of eurozone finance ministers on Wednesday, where a second debt deal for Greece had been widely expected to be rubberstamped, was canceled late on Tuesday as Greek government officials delayed in providing explanations about budget savings and political guarantees demanded by creditor states.

Eurogroup Chairman Jean-Claude Juncker called off the meeting, noting that European Union officials had yet to receive details from Athens about how a 325-million -euro shortfall in savings — arising from Greek politicians? insistence on limited cuts to auxiliary pensions – would be covered.

Juncker added that he had not received ?the required political assurances? from Greek political leaders. He said the eurozone ministers would instead have a teleconference on Wednesday ?in order to discuss the outstanding issues? ahead of the next scheduled Eurogroup summit next Monday.

Prime Minister Lucas Papademos remained locked in a cabinet meeting until late on Tuesday, seeking to plug the shortfall to savings and to obtain the guarantees sought by creditor states.

Sources indicated that Socialist leader and former prime minister George Papandreou had provided Papademos from a written statement of his commitment to the terms of a debt deal voted through Parliament early on Monday but was still waiting for a letter from conservative New Democracy leader Antonis Samaras.

The cabinet reportedly examined a proposal for the 325-million-euro shortfall to be covered from cuts to defense spending, public investment funds and the health sector. According to sources however, this proposal was rejected by Euro Working Group — low-level EU finance ministry officials who were meeting in Brussels on Tuesday. The sources said that the EU officials insisted that the additional savings should come from cuts to pensions.

Some reports indicated last night that supplemental and main pensions might be cut to make up some of the shortfall.

The government has already agreed to 300 million euros worth of cuts to supplemental pensions. The Cabinet reportedly agreed that a third of the sum would come from cuts to relatively genereous state pensions given to employees of state enterprises such as the Public Power Corporation and OTEtelecom while two thirds would come from additional cuts to supplemental pensions.

Despite the obstacles, Papademos earlier on Wednesday sought to be positive, telling his ministers that Parliament’s approval of the country’s new debt deal with its foreign creditors was «a decisive step» toward securing crucial rescue funding but that more was needed. «Many crucial steps need to be taken over the coming days and weeks until the final decision is taken regarding the release of rescue funding at the beginning of March,» he said. He called on his ministers to start working «hard and systematically» in order to complete the «prior actions» demanded by foreign creditors, a reference to a range of budget cuts and reforms.

Papademos added that Transport Minister Makis Voridis, who resigned last week, would be staying on, dousing media speculation about a possible cabinet reshuffle.