The Greek government began a race for parliamentary approval of a stepped-up austerity package vital to keep the debt-laden eurozone state afloat and buy time for Europe to approve new rescue measures.
As Finance Minister Evangelos Venizelos flew home on Monday from talks at the International Monetary Fund in Washington, a newspaper said 85% of private sector bondholders had agreed to participate in a voluntary bond swap to restructure Greece's debt, close to the government's 90% target.
Greek officials said the IMF was seeking written commitments on its latest austerity promises before sending inspectors back probably this week to conclude a review of compliance with a $152-billion U.S. bailout program. Greece has repeatedly missed its deficit reduction targets. IMF and EU approval is essential to release an $11-billion U.S. emergency loan, without which, public salaries, pensions and other bills will go unpaid in October.
Public anger over more belt-tightening remains high and there is increasingly open talk in Europe and beyond of a likely Greek default and a far larger haircut for investors. Greek bank shares fell by more than six per cent to a 19-year low on Monday on media reports of a larger than planned haircut.
Police fired tear gas at protesters on Sunday night outside of parliament.
Unions have launched a fresh round of strikes and protests in the first such unrest after a summer lull.
Austrian Finance Minister Maria Fekter said a debt cut for Greece, with compulsory writedowns for investors, was an option of last resort.
German Chancellor Angela Merkel said default was not an option because it would destroy investors' confidence in Europe.
German Deputy Finance Minister Joerg Asmussen said eurozone finance ministers would probably not be ready to decide on releasing the aid instalment at their next meeting on Oct. 3, which could trigger a cliffhanger that could unsettle markets. Venizelos was expected to lobby lawmakers on his return to pass a new property tax deeply unpopular with the middle class, on which parliament is due to vote tonight.
Prime Minister George Papandreou will discuss his reform plans with Merkel today in Berlin, two days before the German parliament is due to vote on new powers for the euro-zone's financial rescue fund.
Athens's chronic undershooting of agreed fiscal targets and the failure of European officials to staunch worries of a wider eurozone meltdown have hit markets and drawn rebukes from critics stretching from Washington to Beijing. Daily newspaper Eleftherotypia reported participation of private sector bondholders in a Greek debt swap plan is nearing 85%, close to the 90% target set in July.
Under the deal, banks would accept a 21% writedown on Greek government bonds. But the newspaper said the IMF and Greece discussed on the weekend the possibility 40% or more if necessary in a second phase. Privately, bankers say they could face 60% to 80% losses on a Greek default and some would accept a larger amount than they have agreed to absorb if it lowers the risk of bankruptcy. Most Greeks oppose the new austerity campaign but more than twothirds intend to pay taxes imposed by the plan, a poll showed on Monday.
The survey, by pollsters GPO for Mega TV, showed 61% said the measures were not necessary, versus 36.5% who said they were.
Just 6.3% said the program was fair, while 92% disagreed.
However, asked whether they would pay the taxes contained in the plan, 70% said they would, while 23% said they would resist paying the new levy.
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