The euro got off to a bad start this week after European policy makers failed to introduce a plan to stem the region’s debt crisis. Greece’s ability to avoid default hangs in the balance this week as international monitors will assess whether Prime Minister George Papandreou can meet the conditions of rescue loans.
EU finance ministers made clear to Greece over the weekend meeting in Wroclaw, Poland, that it must meet targets to get fresh funds but broke no new ground in dealing with the debt crisis shaking the euro.
In an effort to take a tough stance to avoid default, Greek Prime Minister George Papandreou cancelled a visit to the United States to chair a cabinet meeting on Sunday, a day before European Union and International Monetary Fund inspectors hold a conference call with Finance Minister Evangelos Venizelos to hear how Greece will plug this year’s budget shortfall.
Greece is at risk of not receiving its next aid trance due in October before it runs out of money. At stake is an 8 billion euro ($11 billion) loan tranche from a 110 billion euro bailout secured last year. European Union and International Monetary Fund inspectors will speak today with Finance Minister Evangelos Venizelos to judge whether the government is eligible for its next aid payment due next month.
International lenders are also concerned with the lack of political consensus within Greece on the measures needed to emerge from the crisis. The conservative New Democracy opposition has criticised the government for overtaxing the economy and driving it into a tail spin and called for snap elections saying the policy mix was wrong and was not yielding any results despite peoples’ sacrifices.
Finance chiefs from the euro region said that the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation.
Meanwhile, German Chancellor Angela Merkel, under fire for her hesitant leadership in the euro zone crisis, suffered a heavy defeat in a regional Berlin election on Sunday, weakening her hand before a crucial euro zone vote in parliament at the end of the month.