Greece now needs €145bn bailout to avoid collapse

Greece now needs €145bn bailout to avoid collapse

Greece could need an extra €15bn (£12.5bn) of international aid in addition to the €130bn in the works as the result of its continued failure to stem public spending.

By Emma Rowley
Ahead of a crucial parliamentary vote to agree to a series of stark austerity measures designed to meet lenders' requirements, it emerged the so-called Troika of rescuers are preparing to plough more funds into the troubled European nation.


Amid scenes of continued mounting social unrest, politicians must today decide whether to sign off fresh austerity measures demanded by the country’s international lenders in order to release a second aid package to Athens.


The rescue must be secured by March 20 in order to stave off bankruptcy. It is on that date that the Greek government has to pay back €14.5bn of its debt to holders of its bonds.


On Saturday night, Lucas Papademos, the Greek prime minister, told the nation in a televised address that a rejection of the deal would lead to “uncontrollable economic chaos and social explosion”.


“This agreement will decide the country’s future,” he said. “We are just a breath away from ground zero.”

But it has now emerged that Greece’s “troika” of rescuers - the European Union, the European Central Bank and the International Monetary Fund - are considering whether at least another €15bn will be needed to shore up the country’s banks, Evangelos Venizelos, the Greek finance minister, confirmed yesterday. “The banks need more money, and their idea is for financing in 2015 too,” he said.

Greece has already been the subject of a €110bn bailout, in 2010, which failed to solve its grave budgetary problems.

The new package of financial aid comes on condition of painful spending cuts, the prospect of which are sparking fury among the Greek people, who are mired in a deep recession. The measures include a 22pc drop in the minimum wage, civil servant redundancies and cuts to pensions.

Thousands of protestors massed in Athens yesterday after the Greek cabinet approved the plans late on Friday night, while a general strike brought public transport to a halt in the capital.

The interim coalition government led by Mr Papademos has a large majority, which should mean Sunday night’s parliamentary vote backs the deeply unpopular measures. But defections look likely.

Six members of the coalition government have already resigned in protest over the budget plans – four from the far right, and two socialists.

Leaders from across the political spectrum urged their followers to stomach their anger and back the plans, designed to save around 7pc of Greece’s gross domestic product over three years.

“We have to sacrifice a lot so as not to sacrifice everything,” said George Papandreou, the former prime minister and current leader of the socialist Pasok party. “We must speak honestly and tell Greeks what bankruptcy really means. It means chaos.”

Antonis Samaras, the leader of Greece’s conservative New Democracy party, said the bailout “distances us from bankruptcy, looting, the chaos that would follow” in the absence of a rescue package.

Nonetheless Greek officials are braced for increased protests, which could turn violent, to coincide with the parliamentary vote. In addition, further legislation detailing the measures will have to be voted on within days, though the exact timing has yet to be set.

The atmosphere in Greece is becoming increasingly charged, as the public chafes under the prospect of more austerity measures. Some fear that they are deepening the country’s economic downturn to a dangerous degree.

On Friday, the powerful police union Poasy threatened to arrest members of Greece’s troika of lenders. Poasy said it was offering a bounty of one euro apiece for each of the mission chiefs from the three organisations, whom it called the “undertakers of our people’s dreams”.

Separately, the head of Greece’s Catholic church yesterday made a public appeal to the Pope to aid Greeks in their “tragic situation”, citing hospitals which were lacking heat and medicines.

Economists at Citigroup predict that Greece will avoid a disorderly default on its debts in March, but have raised the chance of Greece exiting the euro over the next year and a half to one in two, roughly double the risk they saw previously. The sticking point will be Greece’s failure to stick to the terms of its rescue packages, which will ultimately exhaust the patience of its supporters, they believe.

“We consider the willingness of euro area creditors including the European Central Bank to continue providing further financial support to Greece, despite Greek non-compliance with programme conditionality, to have fallen substantially,” the economists wrote.