Bloomberg reports that Greek Prime Minister George Papandreou is actively calling on his fellow EU leaders for support, believing that international pressure is crucial in pushing his people to accept a harsh set of austerity measures designed to reduce the Greek debt to sustainable levels 2015. According to the PM, “If there is a strong commitment from the European Union there will be a strong commitment from Greece.” The austerity measures passed an early vote in the Greek house of government, but will face another referendum later this month that could be swayed by levels of public unrest among the nation’s voters.
European Leaders seem to be on the same page as Papandreou, vowing to help the financially embattled neighbor as long as Greece is able to get the austerity bill through its parliament. At an EU summit today in Brussels, German (NYSE:EWG) Chancellor Angela Merkel voiced her support for Greece and concern for the larger union, saying, “We have agreed that there will be a new program for Greece. This is an important decision that says once again we will do everything to stabilize the euro overall.” European Central Bankers and elected leaders of Euro nations also agreed on some new provisions to lower the likelihood of a default, emphasizing the need for “informal and voluntary rollovers of existing Greek debt at maturity,” (ie asking investor not to sell or collect from their holdings in Greek sovereign securities). Some are worried that this will be difficult to enforce.
In spite of support from elected officials, Greece will face a long, uphill battle in righting its country’s economic debacle. From Bloomberg, “Already at a European record of 142.8 percent of gross domestic product, Greek debt is set to rise to 166.1 percent next year, the EU predicts. The effort to cut a budget deficit that is about 10 percent of GDP has helped deepen a third year of recession.” And more, “Greece needs to cover about 4 billion euros of bills maturing between July 15 and July 22 and faces about 3 billion euros of coupon payments in the month, according to Bloomberg calculations. A bigger test comes on Aug. 20 when it must redeem 6.6 billion euros of bonds.”